Commercial mortgages can serve a range of purposes, including the purchase of commercial buy-to-let properties that are leased to other businesses. These are known as commercial investment mortgages, and they are specifically designed for property investors aiming to generate rental income through commercial tenants.
What is a commercial investment mortgage?
Commercial investment mortgages—also known as commercial buy-to-let mortgages—are designed for individuals or companies looking to purchase or remortgage property with the intention of letting it out to another business for profit. These mortgages may also be used to finance higher-risk residential properties, such as Houses in Multiple Occupation (HMOs), under certain lender policies.
How They Work
In principle, commercial investment mortgages function much like other types of commercial loans. However, the key difference lies in how lenders assess your application compared to owner-occupier commercial mortgages, where the borrower uses the premises for their own business.
Lenders will focus on:
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The quality and reliability of tenants
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Lease terms (length, security, and rental income)
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Property type and location
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Borrower's investment experience
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Business case and projected income from the property
Your ability to repay will often be evaluated based on the expected rental income and the strength of the lease agreements, rather than just your personal or business income.
Eligibility criteria
When applying for a commercial investment mortgage, lenders undertake a detailed assessment of both the applicant and the property. The following are the key criteria most providers consider:
Deposit Requirements: A minimum 25% deposit is usually required, though higher-risk properties or applicants may be asked for up to 40%. If remortgaging, an equivalent amount of equity must be held in the property.
Landlord or Investment Experience: Lenders favour applicants with a track record in property letting, even if only in residential markets. That said, specialist or niche lenders may accept newer landlords or entrepreneurs, especially if other criteria (like income and tenant quality) are strong.
Affordability and Financial Strength: The commercial rental yield—projected income from the tenant—will be a key factor in assessing affordability. Most lenders also prefer applicants to have additional income sources or liquid assets as a safety net.
Tenant Strength and Lease Security: A signed lease agreement must be in place by the time of mortgage completion. Lenders will typically run background checks on the commercial tenant, looking for signs of financial stability and business viability.
Property Type and Suitability: The type and use class of the property must be suitable for the intended business tenant. Factors such as location, building condition, and sector relevance will influence lender appetite.
Credit History: While commercial lenders may show more flexibility than residential ones, a strong personal and business credit record will help secure more favourable terms. Minor credit issues may be accepted, but they could affect the rate and available lenders.
How to get a commercial investment mortgage
The most effective way to secure a suitable commercial investment mortgage is by working with a specialist broker—like ourselves—who understands the complexities of this unique sector.
How affordability and repayments are calculated
Commercial investment borrowing is typically assessed based on rental yield, similar to residential buy-to-let mortgages. While lending criteria vary between providers, most will require rental income to cover at least 125% of the monthly loan repayments.
Because this type of financing is highly tailored and often hinges on the strength of your business plan, standard mortgage calculators are not suitable for estimating borrowing capacity.
Repayment structures will vary depending on the mortgage product you choose, but most commercial investment mortgages are interest-only. Interest is usually calculated daily rather than monthly, and loan terms are generally shorter than those of residential buy-to-let mortgages.
Types of property you can invest in:
As long as the property has no residential use, most types of commercial property are eligible for purchase—provided the intended business use aligns with your prospective tenant. In some cases, it may be possible to apply for a change of use classification; however, this must be completed before the loan can be approved.
Below is a non-exhaustive list of commercial property types you might consider investing in:
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Industrial – Factories, warehouses, industrial parks
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Retail – Shops, retail units, shopping centres
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Leisure – Hotels, holiday parks, pubs, gyms
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Offices – Single office units or entire office blocks
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Mixed commercial use – For example, industrial parks combining factories, warehouses, and offices
If the property includes both residential and commercial elements, you’ll need to apply for a semi-commercial mortgage instead.
Available lenders and interest rates
It’s difficult to quote commercial mortgage rates due to the bespoke nature of lenders’ assessments. The exact rate you qualify for will depend on your personal and business circumstances, and the level of risk involved in your investment.
We work with a wide range of high street and specialist commercial lenders, which we’ll recommend based on suitability and how well they serve your business needs.
Examples of lenders who offer commercial investment mortgages include:
- Barclays
- Shawbrook
- Ortus Secured Finance
- Together
- Aldermore
- And many more
Tips for investing in commercial property
Investing in commercial property can be a lucrative long-term opportunity, but success depends on careful planning and strategic decision-making. Here are some key tips to help you maximise your investment:
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Prioritise energy efficiency – Properties with a high EPC rating (B or above) are increasingly sought after. Many lenders offer preferential rates and terms for “green assets,” and energy-efficient buildings are often more attractive to prospective tenants, broadening your appeal.
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Consider a larger deposit or asset-backed lending – The most competitive rates are typically available for mortgages with a loan-to-value (LTV) ratio of 60% or lower. A larger deposit or additional security can help you access better terms.
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Secure long-term leases – Tenancies of 10 years or more are generally viewed as lower risk by lenders. Choosing a reliable tenant and negotiating the longest feasible lease can strengthen your investment position.
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Research market trends – Focus on property types and locations with strong potential for growth in value and rental demand, especially if the asset will serve as your repayment vehicle.
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Diversify your portfolio – Spreading your investments across various sectors or combining residential and commercial properties can help reduce risk and provide more stable returns.
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Seek professional advice – Commercial property investment is a complex field. Working with experienced commercial brokers—like us—can offer valuable insights and support, especially if you’re just starting out.
Frequently Asked Questions
No, you’d need a commercial owner-occupied business mortgage, even if you own two entirely separate ltd companies where directors and shareholders are the same.