Commercial Investment Mortgages in the UK: How They Work
A commercial investment mortgage is a loan to buy, or refinance, a commercial property that you let to a business tenant. The lender looks mainly at the rent, the tenant and the lease, not at your own trading figures. Many lenders ask for a deposit of around 25%, and the cost of getting the loan is more than the interest alone. We are a local broker in Hastings, so below we explain it plainly, from the way the loan is assessed to what it costs.
TL;DR
- A commercial investment mortgage funds property let to someone else, such as shops, offices, industrial units or healthcare premises. It is not for premises your own business occupies.
- Lenders judge the loan mainly on rental income, tenant strength and lease terms, and on your experience as a landlord.
- Many lenders expect a deposit of roughly 25%, and upfront costs can come to more than 5% of the purchase price.
- Rates, fees and early repayment charges differ widely between lenders, so what is right depends on your circumstances and the lender’s criteria.
- A broker can compare the market for you and explain the terms before you apply.
Table of Contents
- What a commercial investment mortgage is
- How lenders assess the loan
- Deposit and loan-to-value
- Rates, fees and early repayment charges
- Worked example: how the rent test shapes the loan
- Refinancing and releasing equity
- Perspective: what we see with investors
- Choosing how to arrange the finance
- Talk to a local broker
- FAQ
- Sources
What a commercial investment mortgage is
It is a way of borrowing to buy a commercial property you intend to lease out. Investors use it to start or extend a property portfolio, as one specialist lender’s guide explains, where the property is held to build equity and generate returns.
You may also see it called a commercial buy-to-let mortgage. One high street bank describes these as secured loans for registered limited companies investing in non-residential property to let to third parties, such as offices, retail, industrial or healthcare space, with terms of up to 25 years.
The key difference from an owner-occupied loan is who uses the building. If your own business will trade from it, the lender assesses your accounts, turnover and cash flow. We cover that route in our guide to owner-occupied commercial mortgages. If a tenant will use it, the lender assesses the rent.
Taking an investment mortgage and then moving your own business in is typically a breach of the loan terms, so choose the right type from the start.
How lenders assess the loan
Expect questions in four areas.
- The rent. Lenders test whether the rent covers the interest with a margin to spare. Lender criteria vary. One building society’s guide, for example, sets 125% interest cover at the higher of 6% or the pay rate for its commercial investment lending.
- The tenant and the lease. A longer lease with a financially sound tenant generally looks stronger than a short one with a new business. Vacant property is treated more cautiously.
- You and your company. The same building society guide asks for a two-year track record managing commercial assets and a personal guarantee, and expects no recent CCJs, defaults, bankruptcy or IVAs within six years. Other lenders set their own rules.
- The building. Energy performance matters. That guide asks for an EPC rating of A to E.
The loan you are offered is normally the lower of two figures: the maximum loan-to-value the lender allows, and the amount the rent can support at their required cover ratio. A strong valuation does not help if the rent is too low, and the reverse is also true.
Deposit and loan-to-value
As a guideline, a high street bank says about 25% of the property value is typically needed, with the exact amount depending on the borrowing, circumstances and credit assessment.
In practice, maximum loan-to-value (LTV) limits differ by lender and property type:
- One specialist lender’s guide caps commercial capital and interest loans at 70% LTV, interest-only at 65%, and offices at 60%.
- A building society’s guide allows up to 75% LTV on commercial investment loans from £300,000.
So a deposit of 25% to 40% is a realistic planning range, depending on the property. Our article on the commercial mortgage deposit goes into where that money can come from.
Rates, fees and early repayment charges
Rates move, so treat any figure as a snapshot and ask for current terms. As examples from September 2026 product guides:
| Lender type | Example terms | Source |
|---|---|---|
| Building society | 6.94% to 7.45%, 2.00% arrangement fee, up to 75% LTV, loans from £300,000 | Product guide |
| Specialist lender | From 7.19% (2-year fix, 75% LTV) and 7.59% (5-year fix, 75% LTV) on loans above £2.5m, early repayment charges of 4%, 3% on a 2-year fix | Product guide |
| Business bank | Loans from £150,000 to £15 million, 2.0% arrangement fee, early repayment charges of 5%, 4%, 3%, 2%, 1% over a 5-year fix | Product guide |
Smaller loans, higher LTV and weaker rental cover generally sit at the more expensive end. Some lenders also offer rate discounts for stronger energy ratings or higher rental cover, so ask about them.
Upfront costs reach beyond the arrangement fee. Valuation, legal fees and other charges mean that total upfront costs can exceed 5% of the purchase price. Budget for them on top of the deposit. For wider context, see our broker-checked commercial mortgage rates and costs.
Worked example: how the rent test shapes the loan
Take a hypothetical unit worth £400,000, let for £30,000 a year. At 75% LTV, the most a lender could consider is £300,000. Now suppose the lender needs rent to cover interest at 125% at a 6% test rate. £300,000 at 6% is £18,000 a year, and 125% of that is £22,500, so the £30,000 rent passes comfortably.
Change the rent to £20,000 and the same loan fails, so the lender would offer less. The figures are illustrative only, not a quote, and each lender uses its own tests.
Refinancing and releasing equity
You can also borrow against a commercial investment property you already own. Some lenders offer purchase, refinance or equity release at up to 70% LTV where repayments come from leases in place. The steps and costs are set out in our commercial remortgage process guide.
If the building is part residential, such as a shop with a flat above, read about semi-commercial mortgages, because lenders treat them differently.
Perspective: what we see with investors
Most investors we speak to focus first on the interest rate. We would start with the rent and the lease. They decide how much a lender will release, and a deal that looks cheap on paper can fall over if the tenant or the lease is weak.
We also encourage clients to cost the whole purchase before they offer: deposit, fees, legal costs, and the early repayment charges if they might sell or refinance. Advice that explains costs and risks clearly is what we aim to give, from first enquiry through to completion and later reviews.
Because we are a whole-of-market broker, we can look beyond one lender’s criteria. Whether a loan suits you depends on your circumstances and lender criteria, and we never promise approval or the lowest rate.
Paul McMath CeMAP CeRER
Choosing how to arrange the finance
You can approach a lender directly or use an adviser. Weighing up a mortgage broker versus a bank comes down to how many lenders you want compared and how much of the paperwork you want handled for you. For a let property, where each lender reads rent, tenant and experience differently, comparing several criteria sets can save you a failed application.
Talk to a local broker
We are a mortgage and protection advice firm based in Hastings, helping investors and business owners across East Sussex, including Eastbourne, Hailsham and Bexhill-on-Sea, and clients across the UK. We can talk through your purchase or refinance and explain the options and risks. Our bridging and commercial finance service covers this kind of lending, and our buy-to-let and limited company mortgage advice covers residential lets.
Get in touch with Prosper Home Loans for an initial conversation. Your property may be at risk if you do not keep up repayments on a loan secured against it.
FAQ
How much deposit do I need for a commercial investment mortgage?
Many lenders ask for around 25%, and some limit lending to 60% to 70% of value depending on the property and repayment type. The exact figure depends on the lender, the property and your circumstances. Remember to add fees and legal costs on top.
Is a commercial investment mortgage the same as commercial buy-to-let?
The terms are used for the same thing: borrowing to buy non-residential property to let to a third party. Lenders may use different names, so compare the criteria rather than the label.
Can I use the property for my own business?
Not under an investment mortgage. Moving your own business in is typically a breach of terms. If you plan to occupy it, you need an owner-occupied commercial mortgage instead.
Can I borrow in my own name?
Some lenders lend only to limited companies, while others consider individuals. Many ask for personal guarantees from directors. Criteria vary, so we can check which lenders fit your structure.
Sources
- The complete guide to commercial investment mortgages
- Commercial buy to let mortgages
- Commercial mortgage deposit guideline
- Commercial mortgages product guide
- Commercial product and criteria guide
- Product guide, September 2026
- Direct commercial mortgages product guide
- Owner-occupier vs investment commercial mortgages
- Commercial loans
Recommended
- Owner-Occupied Commercial Mortgages: How They Work in the UK
- Buying Out a Partner on a Mortgage: How It Works in the UK
- Commercial remortgage process: steps, costs and timing
- From 6%: Broker Checked UK Commercial Mortgage Rates and Costs, 2026
This article provides general information and is not a personal mortgage recommendation. Mortgage availability and eligibility depend on your circumstances and lender criteria. Rates and criteria can change. We will explain any applicable fees before you commit. Think carefully before securing other debts against your home. Consolidating debts over a longer term may reduce your monthly payments but increase the total amount you repay. Your home may be repossessed if you do not keep up repayments
