What is a commercial mortgage?

A commercial mortgage is a loan secured on property used for business, such as an office, shop, industrial unit, hotel or surgery. It is used to buy the property, refinance existing borrowing or raise money against it, and it is usually repaid monthly over an agreed term. If the loan is not repaid, the lender can take the property.

Commercial mortgages are taken by businesses that trade from the property and by investors who let it to tenants. Lending on business property is generally unregulated (FCA Handbook PERG 4.4, accessed 20 Oct 2026), which means the protections that apply to home loans usually do not apply. Mixed-use property with a home in it can be treated differently.

A commercial mortgage works much like a home loan: the lender advances part of the property's value, the borrower pays a deposit, and the loan is repaid with interest over the term. The differences are in the assessment, which looks at business income or rent, and in the terms, which are usually shorter and more varied.

Repayment loans reduce the balance over the term, while interest-only loans keep it the same and need a plan to repay at the end. Rates can be fixed for a period or variable, often linked to the Bank Rate. Offers can include conditions, such as a minimum income cover, that continue for the life of the loan.

The full range of commercial lending, including owner-occupied and investment loans, is covered in the commercial mortgages section, which also explains how lenders compare.

Individuals, partnerships, limited companies, trusts and pension schemes can all take commercial mortgages. Lenders look at the borrower's experience, credit history, assets and other borrowing. Businesses buying their own premises are assessed on trading accounts and cash flow, while investors are assessed on the lease, the tenant and the rent.

Many commercial mortgages are taken by limited companies, and lenders usually ask the directors for personal guarantees. That makes the directors responsible for the debt if the company cannot pay, so it is worth understanding what a guarantee covers before signing.

Newer businesses and first-time investors can borrow, but may find fewer lenders and more conservative terms than borrowers with a longer record.

Commercial mortgages usually need a larger deposit than home loans. The amount depends on the lender, the type of property, the strength of the business or tenant and the borrower's experience. Specialist property, such as hotels or care homes, and weaker trading usually need more. Lenders base the loan on their own valuation, not the price.

Some borrowers offer additional security, such as equity in another property, to reduce the cash deposit. Lenders also want to see where the deposit comes from, such as business reserves, savings or the sale of another asset, and they check that evidence before the offer.

Purchase costs come on top of the deposit. Stamp Duty Land Tax on non-residential property, VAT on some purchases, legal and valuation fees all need to be budgeted for. The commercial mortgage calculator will show how the deposit changes the monthly cost once it is live.

Getting a commercial mortgage usually follows the same steps. The borrower or a broker approaches lenders with details of the property and the business or lease, and receives indicative terms. The lender then instructs a commercial valuation, carries out its checks and sends the case to its solicitors for legal due diligence.

Once the valuation and legal work are complete, the lender issues a formal offer, and the loan completes alongside the purchase or refinance. The process often takes longer than a home loan because the valuation, lease review and checks on the business take time. Gathering accounts, leases and planning documents early helps keep it on track.

Many commercial lenders work mainly through brokers. Firms that arrange commercial lending can be compared on the commercial mortgage brokers page, by rating, reviews and region.

Commercial mortgages fall into a few broad types. Owner-occupied mortgages fund premises a business trades from. Investment mortgages fund property let to tenants. Semi-commercial mortgages cover mixed-use buildings, such as a shop with a flat above. Short-term bridging loans and development finance are also secured on commercial property but work differently.

Each type has its own assessment and lenders. Which one fits depends on how the property will be used, how long the money is needed and how it will be repaid. A purchase that needs work before it can be let is often bridged first and refinanced later.