Commercial Mortgages & Commercial Buy-to-Let (2026): The Complete Basics
Shops, offices, warehouses, surgeries — whether you’re buying premises to trade from or commercial property to let to business tenants, the lending works differently from anything residential. Deposits, rates, the DSCR test, commercial remortgages, and the 100% route most professionals don’t know exists.
Buying commercial property — to trade from or to let?
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Quick answer
A commercial mortgage is a loan secured on business property, and it comes in two distinct flavours: owner-occupier (buying the premises your own business trades from — assessed on your business’s accounts and profits, at up to 75–80% loan-to-value, with established professional practices — GPs, dentists, vets, pharmacists — able to borrow up to 100%) and commercial investment, aka commercial buy-to-let (buying shops, offices or industrial units to let to business tenants — assessed on the rental income, typically capped at 65–75% LTV). The 2026 numbers: rates run roughly 5.5–9.5% fixed (or base rate +2–5.5% variable) — the high street’s sharpest pricing sits near the bottom for strong, low-LTV cases while specialist lending prices the rest — with arrangement fees of 1–2%, terms of 5–25 years, and affordability tested on a debt service coverage ratio around 1.25× (income must exceed stressed payments by a quarter). Unlike residential lending, everything is bespoke: property type, tenant strength, lease terms and your track record each move pricing, most of the market works only through intermediaries, and much of it sits outside FCA regulation. One disambiguation up front, because the searches blur it: commercial buy-to-let (business tenants, commercial premises) is not the same as buying residential BTL through a limited company — different product, different guide. Position as of July 2026.
Your home may be repossessed if you do not keep up repayments on your mortgage.
In this guide
Commercial buy-to-let: investing in business property
The biggest slice of the searches, so first: commercial buy-to-let means purchasing commercial property — a shop, office, warehouse, industrial unit — to let to business tenants. Against residential BTL, the trade-offs are real in both directions. In its favour: yields typically run higher than residential in most regions; commercial leases run longer (3–15 years versus 6–12-month ASTs) with FRI terms (“full repairing and insuring”) pushing maintenance and insurance onto the tenant — a hands-off profile residential landlords envy — and none of Section 24, licensing regimes or the residential regulatory treadmill applies. Against it: void periods bite harder (an empty shop can sit vacant for months while business rates accrue), tenant covenant is everything (a national chain on a ten-year lease and a start-up café on a three-year break clause are wildly different securities — and lenders price the difference), values move with the rental income and lease as much as bricks, and the financing below demands bigger deposits at higher rates. It’s a legitimate diversification for experienced landlords and the natural home for premises-adjacent investors — and a poor first rental property for almost everyone.
Owner-occupier vs investment: the two products
| Owner-occupier | Commercial investment (BTL) | |
|---|---|---|
| You’re buying | The premises your business trades from | Property to let to business tenants |
| Assessed on | Your business’s accounts & EBITDA | The property’s rental income & tenant strength |
| Typical max LTV | 75–80% — professional practices to 100% | 65–75% |
| Rate positioning | The sharper end | Slightly higher — void & covenant risk priced in |
| Typical borrower | Trading businesses, practices, the established self-employed | Landlords diversifying, investors, SIPPs |
The 100% row deserves its sentence: lenders treat established professional practices — medical, dental, veterinary, pharmacy — as near-bulletproof covenants, and several fund practice purchases at up to full value, no deposit. If you’re a GP or medic eyeing your surgery’s freehold, that’s not a typo; it’s one of commercial lending’s best-kept doors. Structures span individuals, partnerships, trading companies and SPVs (the directors and sole traders behind them assessed as ever), and interest-only exists on the investment side for cashflow-led strategies, with capital repayment the owner-occupier norm.
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Rates, fees and costs in 2026
The honest headline is the width of the range: ~5.5–9.5% on fixes (2, 3 or 5 years), or base +2 to +5.5% variable, with high-street banks lending to strong established businesses at 60% LTV occupying the bottom of the band and specialist lenders pricing complexity up the scale. What moves your number: LTV (50% vs 75% can be worth 1–2 full points), asset class (standard offices, retail and industrial price below hotels, care settings and specialist stock), tenant/covenant strength on investment deals, your accounts and credit (adverse adds 0.5–2% and moves you off the high street — the adverse playbook applies here too), and plain negotiation, which is a real feature of this market in a way residential borrowers find alien. Around the rate: arrangement fees of 1–2% of the loan, valuation and legal costs above residential norms (commercial valuations are bespoke reports), ERCs of 3–5% stepping down through a fix — read the schedule before signing, not before selling — and note that commercial property purchases pay non-residential SDLT rates, a different (generally kinder) schedule than the residential surcharge regime. Timescales: credit-backed terms in days, completion typically 4–8 weeks.
How lenders assess you: the DSCR test
Residential BTL runs on ICR; commercial runs on DSCR — debt service coverage ratio — and the logic is worth internalising: the income (rent on investment deals; adjusted EBITDA for owner-occupiers) must cover the mortgage payments by a margin, typically 1.25×, stress-tested above pay rate. Worked: borrow £800,000 at 6.25% over 20 years on repayment and the annual debt service is ~£70,000 — so a lender wanting 1.25× needs to see ~£87,500 of sustainable annual rent or business profit before the deal passes, whatever the bricks are worth. That’s why a beautifully valued building with a weak lease bounces while a modest unit with a national tenant on FRI terms sails through, and why owner-occupier applications live and die on two-to-three years of accounts. The rest of the file reads like specialist lending everywhere: 25–40% deposits as the working assumption (professionals excepted), personal guarantees from directors as standard, experience weighted, and every element negotiable case-by-case — the structural reason this market runs through brokers rather than price-comparison tables.
Commercial remortgages
The refinance side deserves its own attention because the wins are chunky: commercial remortgaging is routine, and the classic triggers are a fix expiring onto a punchy reversion rate, an LTV that’s improved (repayments plus appreciation dropping you into a cheaper band — the same logic as any investment refinance, with bigger numbers), equity release to fund the next acquisition or the business itself, and restructuring (moving from a bridging or short-term facility onto term debt, or consolidating facilities). The mechanics mirror the purchase process — DSCR re-tested, property revalued, 4–8 weeks — and the same bespoke-pricing rule applies double: incumbent lenders price renewal against inertia exactly as residential ones do, and the commercial equivalent of drifting onto the SVR costs proportionally more. If the lease book has strengthened or the LTV has fallen since you last financed, you’re holding repricing leverage; the market only pays it if asked.
What commercial lending is — and isn’t
- It isn’t limited-company residential BTL. Buying ordinary rental houses through an SPV uses residential BTL products with company wrappers — that guide is here. Commercial mortgages are about commercial property, whoever borrows.
- Semi-commercial sits between. A shop with a flat above, a pub with letting rooms — mixed-use property runs through semi-commercial products with their own criteria; mention it to your broker and the right shelf appears.
- HMOs and holiday lets aren’t commercial — large HMOs and holiday lets are specialist residential lending, despite the business-like feel.
- Much of it is unregulated. Lending to businesses on commercial premises generally sits outside FCA consumer protection — sophistication is assumed, which is one more argument for professional advice on anything unfamiliar.
The bottom line
Commercial mortgages are two products wearing one name: business-account-assessed owner-occupier lending to 80% (or 100% for the professions), and rental-assessed commercial investment lending to ~75% — both bespoke, both DSCR-tested at ~1.25×, both priced across a 5.5–9.5% range where preparation and placement move whole percentage points. Commercial buy-to-let earns its higher yields with real void and covenant risk; the remortgage side rewards anyone whose LTV or lease book has strengthened; and the entire market’s broker-led structure isn’t a sales line — it’s the plumbing.
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Commercial mortgages: FAQs
What is a commercial buy-to-let mortgage?
A loan for purchasing commercial property — shops, offices, industrial units — to let to business tenants, assessed on the property’s rental income and the strength of the tenant and lease rather than your salary. Against residential BTL it offers higher typical yields, longer leases (3–15 years) and FRI terms that push repairs and insurance onto tenants, in exchange for harder-hitting void periods, covenant risk and stiffer financing: 25–35% deposits, rates above residential BTL, and case-by-case underwriting. It suits experienced landlords diversifying, not first-time investors.
How much deposit do I need for a commercial mortgage?
Typically 25–40%. Owner-occupiers buying premises their business trades from reach 75–80% LTV with most lenders (20–25% down), while commercial investment property caps around 65–75% (25–35% down), with asset class and tenant strength setting the exact line. The stand-out exception: established professional practices — medical, dental, veterinary, pharmacy — can borrow up to 100% at several lenders, who treat practice income as premium covenant. Bigger deposits buy materially better rates here: the 50%-vs-75% LTV gap can be worth 1–2 full percentage points.
Why are commercial mortgage rates higher than residential?
Risk and bespokeness. Commercial values move with rental income and lease strength, voids run longer than residential, resale is slower, and every deal is individually underwritten rather than algorithmically priced — so 2026 rates run roughly 5.5–9.5% fixed (or base +2–5.5% variable) against low-to-mid-4s residential fixes. Within the range, your position is movable: LTV, asset quality, tenant covenant, clean accounts and straightforward structure all pull pricing down, and negotiation is a genuine feature of this market. Arrangement fees of 1–2% and chunkier valuation and legal costs sit alongside the rate.
How is commercial mortgage affordability assessed?
Through debt service coverage: the income — rental income for investment deals, adjusted EBITDA for owner-occupiers — must cover the mortgage payments by typically 1.25×, stress-tested above the pay rate. Example: £800,000 over 20 years at 6.25% costs ~£70,000 a year, so a lender wanting 1.25× cover needs ~£87,500 of sustainable rent or profit. Alongside the ratio: two-to-three years of accounts for trading businesses, tenant and lease scrutiny for investments, personal guarantees from directors as standard, and experience weighed throughout.
Can I remortgage a commercial property?
Yes — commercial remortgaging is routine and often lucrative. The classic triggers: a fixed term expiring onto an expensive reversion rate, an improved LTV (repayments plus appreciation unlocking cheaper bands), equity release to fund the next purchase or the business, and restructuring off bridging or short-term facilities onto term debt. The process mirrors a purchase — revaluation, DSCR re-test, roughly 4–8 weeks — and the incumbent lender’s renewal offer should always be priced against the market, since commercial lenders price inertia exactly as residential ones do.
Is commercial buy-to-let the same as limited company buy-to-let?
No — the terms get tangled but the products are different. Limited company buy-to-let means holding ordinary residential rental property inside an SPV: residential BTL lending with a corporate borrower, driven by tax structure. Commercial buy-to-let means the property itself is commercial — let to business tenants on commercial leases — whether you buy personally or through a company. Different lenders, different assessment (ICR vs DSCR), different deposits and rates. Plenty of investors use an SPV for commercial property too, which is where the confusion breeds; the property type, not the borrower, decides which market you’re in.
- Commercial lender criteria and rate guides — owner-occupier and investment LTVs, DSCR conventions and 2026 pricing bands
- Specialist market analyses — professional practice lending, semi-commercial criteria and commercial remortgage triggers (2026)
- HMRC — non-residential SDLT rates
Important information
nextmove is an introducer, not a lender or adviser. This article is for general information only and does not constitute financial advice. Commercial mortgage rates, loan-to-value limits, criteria and figures are indicative as of July 2026, are individually negotiated, and change with market conditions. Most commercial lending is not regulated by the Financial Conduct Authority. We introduce you to FCA-regulated, whole-of-market mortgage brokers who can advise on your individual circumstances (including unregulated commercial cases where appropriately qualified), and we may receive a fee or commission for doing so.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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