The Ultimate UK Commercial Mortgage Guide 2026

A commercial mortgage is a loan secured on property used for business, whether you trade from it or let it to a business tenant. Lenders look at the property, the income that will pay the loan and your experience. Most want a 25% to 40% deposit, and cases take longer than residential mortgages.

That covers anything from a shop or office to a factory, pub, hotel, care home or a building with flats above a shop. Unlike residential lending, there are few standard products. Each lender has its own appetite for property types, sectors and borrowers, so finding the right lender matters more than the headline rate.

This guide explains the main types of commercial mortgage, how lenders assess them, how property is valued, what it all costs and how long it takes. Each section links to a detailed guide. For help with your own case, see our commercial mortgage advice.

What is a commercial mortgage?

It is a loan secured on business property, usually over 5 to 25 years. Lenders want to see that the business profits or the rent cover the payments comfortably, often by 125% to 150% or more. Expect to put in 25% to 40%, provide accounts or lease details, and allow 6 to 12 weeks. Most commercial mortgages are not regulated by the FCA.

At a glance

	Typical position in 2026
Deposit	Usually 25% to 40%. Some owner-occupied lending up to 75% or 80% loan-to-value
Term	Often 5 to 25 years
Rates	Fixed or variable, often priced as a margin over Bank Rate
Income test	Business profits for owner-occupiers, rent and lease quality for investors
Timescale	Typically 6 to 12 weeks, longer for complex cases
Regulation	Usually unregulated

What are the main types of commercial mortgage?

Owner-occupied

For a business buying premises it will trade from, such as a dental practice buying its surgery or a manufacturer buying its unit. The lender’s main question is whether the business’s profits can pay the mortgage. Expect to provide two or three years of accounts, management figures and often projections.

Buying your premises can turn rent into an asset. Some owners hold the property in a separate company or pension scheme. Take tax advice on the structure before you buy.

Commercial investment

For buying property to let to a business tenant. The lender looks at the rent, the tenant’s strength and the lease: its length, break clauses and who pays for repairs. A long lease to a strong tenant is easier to finance than a short lease or a vacant unit. See our commercial buy-to-let guide.

Semi-commercial

For mixed-use property, most often a shop with a flat above. Lenders consider both incomes, and some offer better terms than pure commercial lending. If you or your family will live in at least 40% of the property, the mortgage is likely to be regulated, as set out in PERG 4.4 of the FCA Handbook. See our semi-commercial mortgage guide.

Which situations do lenders see most?

These are illustrative situations, not Option Finance client outcomes.

How do lenders assess a commercial mortgage?

Factor	What lenders look at
The property	Type, location, condition, how easy it would be to sell or re-let
The income	Trading profits, or rent and lease terms
Debt service cover	How comfortably income covers the payments, often 125% to 150% or more
You	Sector experience, other assets and liabilities, credit history
Deposit or equity	Usually 25% to 40%
Personal guarantees	Often required from directors

How is commercial property valued?

Commercial valuations are carried out by a RICS-registered commercial surveyor instructed by the lender. There are three main approaches:

Approach	Used for	What drives the value
Market value with vacant possession	Offices, shops and units you will occupy	Comparable sales and how easy it is to sell
Investment value (yield)	Let property	The rent, the lease length and the tenant’s strength
Trading value	Pubs, hotels, care homes, B&Bs	The profit a competent operator could make

For let property, a small change in yield moves the value a lot. A unit let at £24,000 a year is worth about £343,000 at a 7% yield, but about £267,000 at 9%. That is why lease length and tenant quality matter so much.

Which property types need a specialist lender?

Some sectors are valued and assessed on their trading performance, not just the bricks and mortar. Lenders want sector experience and good trading figures.

Sector	What is different	Guide
Pubs and bars	Valued on trade, licences, tied or free of tie	Pub mortgages
Hotels	Trading accounts, occupancy, seasonality	Hotel mortgages
B&Bs and guest houses	Mix of home and business	B&B mortgages
Care homes	Inspection ratings, occupancy and fee mix	Care home mortgages
Land	Planning status decides the lending	Land mortgages

Offices, shops and industrial units are usually valued as property, with lender appetite depending on location and demand.

Should you buy personally, through a company or a pension?

Route	Points to weigh
Personally	Simpler. Rent from a tenant is taxed as your income
Limited company	Profits taxed at corporation tax rates. Lenders usually want personal guarantees from directors
Pension scheme (SIPP or SSAS)	Some schemes can buy commercial property, sometimes with borrowing, and your business can pay rent to the pension. Specialist pension advice is essential

There is no single right answer. It depends on your tax position, what happens to the property later and who else is involved. Agree the structure with your accountant before the lender application, because changing it later costs time and money.

What does a commercial mortgage cost?

Commercial rates depend on the lender, sector, loan-to-value and your experience. Many are priced as a margin over Bank Rate, which was 3.75% after the Bank of England’s decision on 17 September 2026, or as a fixed rate. Budget for:

• Arrangement fee, often 1% to 2% of the loan
• Valuation by a commercial surveyor, usually more expensive than a residential valuation
• Legal fees for both your solicitor and the lender’s
• Broker fee, confirmed in writing before you proceed
• Stamp Duty at non-residential rates in England and Northern Ireland: 0% up to £150,000, 2% to £250,000 and 5% above. On a £400,000 purchase that is £9,500. See GOV.UK’s non-residential rates
• VAT on the price, if the seller has opted to tax the building and the sale is not a transfer of a going concern. HMRC explains this in VAT Notice 742A

What documents will you need?

• Two to three years of business accounts and recent management accounts
• Projections, especially for a growing or newer business
• For let property: the lease, rent schedule and tenant details
• A schedule of other property you own and any borrowing
• Proof of deposit and where it came from
• ID and address for every director or shareholder

Having these ready before the lender asks is one of the simplest ways to speed a case up.

What if you need money faster or for works?

Not every commercial purchase suits a long-term mortgage straight away. A bridging loan can buy at auction, fund refurbishment or bridge a gap, then be refinanced. Development finance funds building or conversion in stages. See our bridging loan guide, development finance guide and auction finance guide.

Can you refinance or raise capital?

• Remortgaging commercial property can lower your rate or release equity for the business. See our commercial remortgage guide.
• Second charge loans raise money without disturbing an existing mortgage. See our commercial second charge guide.

How does the process work?

1. Initial consultation: your business, the property and what you need.
2. Lender sourcing: high street banks, challenger banks and specialist lenders.
3. Indicative terms: outline terms showing amount, rate, term and conditions.
4. Full application: accounts, projections, property and lease details.
5. Valuation by a commercial surveyor.
6. Credit approval by the lender’s credit team.
7. Legal work for both sides.
8. Completion.

Allow 6 to 12 weeks for a straightforward case.

What mistakes should you avoid?

1. Choosing on rate alone. A lender with no appetite for your sector wastes weeks.
2. Ignoring the lease. A break clause or short lease can cut the loan.
3. Forgetting VAT. It can change how much cash you need on completion.
4. Leaving the structure too late. Decide personal, company or pension with your accountant first.
5. Thin paperwork. Missing management accounts or projections slow credit approval.

Frequently asked questions

Speak to Option Finance about your commercial property

Tell us about the property, the business or tenant and what you need. We will tell you straight which lenders want the deal, what you can borrow and what to have ready.

Book a free initial consultation using the enquiry form below. See also our commercial mortgage advice and bridging finance advice.