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A commercial mortgage is a loan secured against a non-residential property. It works similarly to a residential mortgage: you borrow a percentage of the property value, the lender takes a charge over the property, and you repay the loan in monthly instalments over an agreed term.

The key differences from residential mortgages:

• Higher deposits: Most commercial lenders require 25-40% deposit, compared to 5-15% for residential.
• Shorter terms: Typical terms are 15-25 years, though some lenders offer up to 30.
• Higher rates: Commercial rates start from around 5% for the strongest applications, compared to 4-5% for residential.
• More complex assessment: Lenders evaluate the property, the business, the borrower and the rental income (for investment properties).
• Commercial valuation required: Properties are valued on a commercial basis, often factoring in rental yield and business viability.

Commercial mortgages are available to limited companies, partnerships, sole traders, pension funds (SIPPs and SSASs), offshore companies and individuals buying commercial property as an investment.

Each type has different rate structures, deposit requirements and assessment criteria. The guides below cover each in detail.

Rates depend on the loan-to-value ratio, property type, business financials and borrower experience. A 60% LTV owner-occupied mortgage on a standard office will attract a very different rate from a 75% LTV development loan on a ground-up residential conversion.

Read our full guide to commercial mortgage rates for detailed breakdowns by property type and borrower profile.

Unlike residential mortgages, 90% or 95% LTV commercial mortgages do not exist. The minimum is typically 25% deposit, and many lenders prefer 30-40% depending on the property type and risk profile.

Read our full guide to commercial mortgage deposits for strategies to reduce your deposit requirement and alternative funding options.

Commercial mortgages are available to a wider range of borrowers than most people expect:

• Limited companies: The most common borrower type. Lenders assess the company accounts, director credit and the property.
• Sole traders and partnerships: Assessed on personal and business financials. Personal assets may be considered.
• SPVs (Special Purpose Vehicles): Companies set up specifically to hold property. Standard for investment purchases.
• SIPPs and SSASs: Pension funds can buy commercial property, with the business paying rent to the pension. Tax-efficient but complex.
• Offshore companies: Some lenders work with offshore structures, though options are more limited and rates higher.
• First-time buyers: Yes, you can get a commercial mortgage without property experience, though lenders may require a larger deposit or charge a higher rate.

Most lenders require the business to have been trading for at least 2 years with filed accounts. Start-ups can access commercial mortgages but need a strong business plan and larger deposit.