The Ultimate UK Commercial Mortgage Guide 2026

What is a commercial mortgage?

A commercial mortgage is a loan secured against a non-residential property. This covers an enormous range of property types, from a small high street shop to a large industrial warehouse. Commercial mortgages work on broadly the same principle as residential mortgages — you borrow money to buy a property and repay it over an agreed term with interest — but the criteria, rates, terms, and processes are quite different.

Commercial lending is less standardised than residential lending. Each lender has its own appetite for different property types, risk profiles, and borrower backgrounds. This makes using a specialist broker particularly valuable, as we can navigate the market efficiently and present your case to the most appropriate lenders. For terminology used throughout this guide, see our mortgage glossary.

Types of commercial mortgage

Owner-occupied commercial mortgages

These are for businesses buying premises they will operate from — a restaurant purchasing its building, a manufacturer buying a factory, or a professional firm acquiring office space. Lenders assess both the property and the underlying business. Strong trading accounts, a solid business plan, and relevant experience all strengthen your application. Owner-occupied mortgages can sometimes attract more favourable terms because the lender sees the borrower as invested in the property's upkeep.

Commercial investment mortgages

These are for purchasing commercial property to let to a tenant. The key consideration for lenders is the quality of the tenant and the lease: a property let on a long lease to a strong covenant tenant (such as a national retailer or government body) is viewed very differently from a property let to a small start-up on a short-term agreement. Rental income must typically cover 125-150% of the mortgage payments.

Semi-commercial or mixed-use mortgages

A mixed-use property contains both commercial and residential elements — the classic example being a shop with a flat above. These can be financed on either a commercial or a semi-commercial basis depending on the lender and the split between commercial and residential floor space. Some specialist lenders offer particularly competitive rates for mixed-use properties. If you also need a buy-to-let mortgage for the residential element, we can advise on the best structure.

Property types you can finance

The commercial mortgage market covers a wide range of property types, each with its own lending nuances:

• Offices — from small suites to entire office buildings. Well-located modern offices in strong commercial areas are the most straightforward to finance.
• Retail units — high street shops, retail parks, and shopping centres. Lender appetite varies with the retail climate, but well-let units in busy locations remain popular.
• Industrial and warehouse — units on industrial estates, distribution centres, and storage facilities. Strong demand due to growth in e-commerce and logistics.
• Pubs, restaurants, and hotels — specialist lenders understand the hospitality sector. Trading accounts and management experience are key assessment criteria.
• Care homes and medical facilities — a niche but well-served sector with specialist lenders who understand CQC ratings, occupancy levels, and staffing requirements.
• Land with planning permission — financeable but typically requires a larger deposit and may be structured as development finance rather than a standard commercial mortgage.

How commercial mortgage affordability is assessed

Lenders assess commercial mortgage applications based on multiple factors:

• The property — type, location, condition, value, and suitability as security
• The borrower — business track record, personal financial position, experience in the sector, and credit history
• The income — for investment properties, the rental income and quality of the lease. For owner-occupied, the business's trading profits and ability to service the debt
• The deposit or equity — most lenders require at least 25% equity, with better terms at 30-40%
• The exit strategy — particularly for bridging and development finance, lenders want to understand how the loan will be repaid

Development finance

If you are building new commercial premises, converting a property to a different use, or undertaking a major refurbishment, standard commercial mortgages may not be suitable. Development finance is specifically designed for construction and conversion projects.

How development finance works

Unlike a standard mortgage where the full loan is advanced on day one, development finance is drawn down in stages as the project progresses. The lender appoints a monitoring surveyor who inspects the work at agreed milestones and authorises each drawdown. This protects both the lender and the borrower.

Key features of development finance:

• Funding typically covers 60-70% of the land cost and up to 100% of the build costs
• Total borrowing usually capped at 60-70% of the projected end value (Gross Development Value or GDV)
• Terms of 12-24 months, aligned with the expected build programme
• Interest can often be "rolled up" (added to the loan) rather than paid monthly, helping cash flow during construction
• Requires a detailed development appraisal, planning permission, and typically a fixed-price building contract

Upon completion, the development finance is repaid — either by selling the finished units or by refinancing onto a standard commercial mortgage or buy-to-let mortgages.

Bridging finance for commercial property

Bridging loans are short-term, high-speed finance products designed to fill a funding gap. In the commercial property world, they are used in several scenarios:

• Auction purchases — when you have 28 days to complete and cannot arrange a standard mortgage in time
• Refurbishment projects — to buy and renovate a property before refinancing onto a long-term mortgage
• Chain breaks — when you need to buy before your existing property has sold
• Unmortgageable properties — properties that cannot currently get a standard mortgage (due to condition, lack of kitchen or bathroom, structural issues) but will qualify after works are completed
• Planning gain strategies — purchasing a property, obtaining planning permission to increase its value, then refinancing or selling

Bridging rates are higher than standard mortgages — typically 0.5% to 1.5% per month — but the speed (finance can often be arranged in 1-2 weeks) and flexibility make them an essential tool for commercial property investors and developers.

The commercial mortgage application process

1. Initial consultation — we discuss your project, business background, and requirements to understand the best route
2. Sourcing — we approach the most suitable lenders from our panel, including high street banks, specialist commercial lenders, and private finance houses
3. Indicative terms — lenders provide outline terms (often called a heads of terms or term sheet) confirming the amount, rate, term, and conditions
4. Full application — we submit a detailed application with business accounts, projections, property details, and legal documentation
5. Valuation — the lender instructs a commercial surveyor to value the property
6. Credit approval — the application goes through the lender's credit committee
7. Legal work — solicitors act for both the lender and the borrower to complete the transaction
8. Completion and drawdown — funds are released and the mortgage begins

The timeline for commercial mortgages is typically longer than residential: expect 6 to 12 weeks for a straightforward case, potentially longer for complex or large transactions. See how our process works for a general overview, and get in touch to discuss your specific project.

Why use a broker for commercial finance?

The commercial lending market is fragmented and opaque. Unlike residential mortgages, where rates are openly advertised, commercial lenders often require a detailed proposal before they will even indicate terms. A broker brings several critical advantages:

• Market access — we have relationships with dozens of commercial lenders, from major banks to specialist funders you would never find on your own
• Presentation — we know how to package your application to meet each lender's criteria and present your business in the best possible light
• Negotiation — we negotiate terms on your behalf, often securing better rates and more flexible conditions than you could achieve directly
• Speed — we know which lenders can move quickly and which processes to follow for the fastest completion
• Ongoing support — commercial property finance often evolves as your portfolio or business grows; we remain your adviser for the long term. Read our case studies for real examples of commercial deals we have arranged. If you are a self-employed business owner who also needs a residential mortgage, we can help with that too