What Is a Commercial Mortgage?

A commercial mortgage is a loan used to purchase or refinance property that is used for business or investment purposes, rather than as a residential home.

Commercial mortgages are commonly used by:

• Business owners buying the premises they trade from

• Landlords and investors purchasing commercial or mixed-use property

• Companies refinancing existing commercial buildings

While the basic principle is similar to a residential mortgage, commercial lending is assessed very differently and is far more case-specific.

What types of property require a commercial mortgage?

A commercial mortgage is typically required for property that is:

• Used wholly for business purposes

• Part commercial and part residential (often referred to as mixed-use or semi-commercial)

• Held as an investment rather than a primary residence

Common examples include:

• Shops and retail units

• Offices and office buildings

• Warehouses and light industrial units

• Mixed-use buildings, such as shops with flats above

In some cases, a property that looks residential may still require a commercial mortgage if it is used primarily for business or investment.

Owner-occupier vs investment commercial mortgages

Commercial mortgages broadly fall into two main categories.

Owner-occupier commercial mortgages

These are used when a business is buying or refinancing the property it trades from. The affordability assessment is usually linked to the strength and sustainability of the business itself.

Examples include:

• A café owner buying their premises

• A trades business purchasing a warehouse or workshop

• A professional practice buying office space

Investment commercial mortgages

These are used when the property is being purchased or refinanced as an investment, rather than for the borrower’s own business use. In these cases, lenders typically focus more heavily on rental income, tenant quality and lease terms.

Examples include:

• Retail units let to third-party tenants

• Mixed-use properties generating rental income

• Commercial buy-to-let property held through a limited company or SPV

How are commercial mortgages assessed?

Commercial mortgage applications are assessed on a combination of factors, including:

• The type and condition of the property

• How the property is used

• The borrower’s experience and financial position

• Business accounts or rental income

• Loan-to-value and affordability

Unlike residential mortgages, there are no universal criteria. Different lenders apply different policies, and the way a case is structured can significantly affect the outcome.

This is why commercial mortgages are rarely suited to automated calculators or “one-size-fits-all” solutions.

How much deposit is needed for a commercial mortgage?

Deposits for commercial mortgages are typically higher than for residential borrowing.

As a general guide:

• Loan-to-value is often in the region of 65–75%

• This means a deposit of around 25–35%

The exact requirement depends on:

• Property type

• Borrower profile

• Whether the property is owner-occupied or investment

• The lender’s appetite at the time

Some properties and scenarios may require larger deposits.

Are commercial mortgages regulated?

Most commercial mortgages are not regulated in the same way as residential mortgages.

However, certain situations — such as lending on property with a residential element — may fall under different regulatory treatment. This depends on how the property is used and who occupies it.

Understanding whether a loan is regulated or unregulated is an important part of the advice process.

Why commercial mortgage advice matters

Commercial mortgages involve more variables than residential borrowing. Property use, income structure, lease terms and future plans all play a role.

Approaching the wrong lender or structuring an application poorly can lead to:

• Delays

• Declined applications

• Less favourable terms

Good advice focuses on what is realistically achievable, not theoretical maximums.

Taking the next step

If you’re considering a commercial mortgage — whether to purchase, refinance or restructure property in North London — understanding how lenders assess applications is a valuable first step.

For more specific scenarios, you may also find our Commercial Mortgage FAQs helpful.

If you’d like to discuss your own plans, a short conversation can often clarify options early on.

Talk to us