Securing a commercial mortgage in the UK is one of the biggest financial decisions an SME owner will ever make. Whether you are looking to purchase your business premises, invest in commercial property, or refinance an existing mortgage, understanding how commercial mortgages work – and how to access the right deal – is essential.
Unlike residential mortgages, commercial mortgage products are tailored specifically for businesses, with different eligibility criteria, rate structures, and lending terms. In this guide, we cover everything you need to know about securing a commercial mortgage in the UK, from rates and eligibility to the application process.
What Is a Commercial Mortgage?
A commercial mortgage is a loan secured against a commercial property – such as an office, warehouse, retail unit, or mixed-use building. They are typically used by businesses to purchase premises for trading purposes (owner-occupied) or by investors looking to buy property they will rent out to other businesses.
Commercial mortgages in the UK usually range from £25,000 to several million pounds, with loan terms of between 3 and 25 years. Like a residential mortgage, the property is used as security, meaning the lender can repossess it if you fail to keep up repayments. This type of property finance is quite different from unsecured business loans, which do not require a property as collateral.
Commercial Mortgage UK Rates: What to Expect in 2026
Commercial mortgage rates in the UK are typically higher than residential mortgage rates, reflecting the additional risk lenders take on. In 2026, rates generally range from around 3.5% to 7% or more, depending on a range of factors including the financial strength of the business, the loan-to-value (LTV) ratio, the type of property, and whether you choose a fixed or variable rate product.
Most commercial mortgages offer either a fixed rate – giving certainty over monthly repayments – or a variable rate, which may be lower initially but can change with market conditions. Many lenders also charge arrangement fees, valuation fees, and legal costs, so it is important to factor these into your overall cost of borrowing when comparing products.
Who Can Apply for a Commercial Mortgage in the UK?
Commercial mortgages are available to a wide range of businesses and property investors. Most high street banks, challenger banks, and specialist lenders will consider applications from limited companies, sole traders, partnerships, and property investment vehicles such as limited liability partnerships (LLPs) or special purpose vehicles (SPVs).
Lenders will assess your application based on the following key criteria: the business trading history and profitability, the creditworthiness of the directors or owners, the value and condition of the property being purchased, and the LTV ratio you are requesting. Most lenders require at least two to three years of trading accounts, though specialist lenders may consider newer businesses with a strong business plan and experienced directors.
Owner-Occupied vs Commercial Investment Mortgages
There are two main types of commercial mortgage available to UK businesses and investors:
Owner-occupied commercial mortgages are used when the borrowing business intends to trade directly from the property. Lenders typically lend up to 70-75% of the property value (meaning you need a deposit of 25-30%), and the loan is assessed based on the business ability to service the debt from its trading income. This route is popular with SMEs looking to stop paying rent and build equity in their own premises.
Commercial investment mortgages (sometimes called commercial buy-to-let) are used when the property is to be rented out to tenants. Here, lenders assess the rental income against the mortgage repayments using a rental coverage ratio – typically 125-145%. LTV limits are broadly similar, though some specialist lenders will offer up to 75-80% on particularly strong investment properties in prime locations.
Key Costs to Budget for When Taking Out a Commercial Mortgage
Before applying, it is important to understand the full range of costs involved beyond the headline interest rate. Here are the key costs to budget for:
- Arrangement fee – typically 1-2% of the loan amount, charged by the lender to set up the facility.
- Valuation fee – ranges from a few hundred pounds to several thousand, depending on the size and complexity of the property.
- Legal fees – you will need your own solicitor, and the lender will also instruct their own legal team whose costs you may be required to cover.
- Broker fee – if using a commercial finance broker, fees are often payable on completion only and can be offset by the better rates and terms secured.
- Stamp Duty Land Tax (SDLT) – charged on commercial property purchases in England over £150,000, at rates of 2% up to £250,000 and 5% above that threshold.
How to Apply for a Commercial Mortgage: Step by Step
The commercial mortgage application process in the UK typically follows these steps: gather your financial documents (two to three years of business accounts, management accounts, and bank statements), obtain a professional valuation of the property, identify suitable lenders from across the market, submit a formal application with supporting documents, and complete the legal due diligence process before drawdown.
Working with a specialist broker significantly improves your chances of securing the right deal. At Growth Business Finance, we have access to the whole of the market – including lenders that do not deal directly with businesses – and can match your requirements to the most appropriate lenders quickly and efficiently. This is particularly valuable if your situation is complex, such as a newer business, an unusual property type, or a higher LTV requirement.
If you are also considering asset-based lending or other forms of business finance, our team can help you compare all the options and find the most cost-effective solution. You can also explore our dedicated commercial mortgages and property finance page for more detail on what we offer.
Get in touch with Growth Business Finance for a free, no-obligation consultation. Call us on 020 3432 2341 or apply online at growthbusinessfinance.com today.