What is a commercial mortgage

A commercial mortgage is a type of loan used to buy, refinance or invest in property that’s intended for business use rather than personal living. In the UK, this can include anything from a high-street shop or office building to warehouses, hotels, gyms, care homes or rental properties such as blocks of flats.

For example, a restaurant owner in Manchester might use a commercial mortgage to purchase their premises instead of continuing to rent, while a small property investor in Birmingham could use one to buy a mixed-use building with shops on the ground floor and flats above. Unlike residential mortgages, commercial mortgages are assessed largely on how the property will generate income and whether the business can comfortably afford the repayments.

When are Commercial mortgages normally used?

Most people turn to commercial mortgages when they’re ready to take control of their business premises or expand their property portfolio. A growing digital agency in London might purchase a larger office space to accommodate more staff, while a personal trainer could buy a small gym unit rather than leasing indefinitely. Investors often use them to acquire commercial units that generate rental income, such as retail spaces or industrial warehouses leased to other businesses.

They’re also frequently used to refinance existing properties. For instance, a landlord who has seen the value of their building rise may release equity through a new commercial mortgage to fund renovations or purchase additional properties. Developers may also use them to convert office buildings into apartments or modern business units.