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Commercial Buy-to-Let Mortgages: What You Need to Know

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If you’re looking to purchase a commercial property that you want to rent out to a business, you’ll need a commercial buy-to-let mortgage. This type of mortgage is used for any type of commercial property that you plan to let out, such as an office block, retail space, gym, hotel, or industrial unit. While you may understand the basics of how these mortgages work if you have a mortgage on your home, there are additional details and nuances to consider.

In this article, we will provide you with the information you need to know about commercial buy-to-let mortgages. You’ll learn about what they are, how they work, and how to get one. We’ll also cover eligibility requirements, rates and costs, and remortgaging a commercial buy-to-let property. Finally, we’ll show you how to get matched with a commercial buy-to-let specialist who can help you navigate the process.

Key Takeaways

  • Commercial buy-to-let mortgages are necessary if you plan on renting out a commercial property to a business.
  • Eligibility requirements, rates, and costs vary depending on the lender and type of property.
  • Speak to a commercial buy-to-let specialist to ensure you get the best deal for your situation.

Can You Get a Buy-to-Let Mortgage on a Commercial Property?

Yes, you can get a buy-to-let mortgage on a commercial property, just like you can for a residential property. This means you can purchase properties such as office blocks, retail units, and warehouses, and let them out to businesses. A buy-to-let mortgage for a commercial property is secured against the property itself, and the amount you can borrow depends on the property value and rental income potential. It’s a great option for those looking to invest in commercial property and generate income from renting it out.

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Speak to Our Commercial Mortgages Expert

When it comes to commercial mortgages, it’s important to work with an expert who understands the complexities of the process. A commercial mortgage broker can help guide you through the process of securing finance for commercial property investments, making it straightforward and hassle-free. By enquiring online or over the phone, you can get in touch with a specialist broker who can help you maximise your chance of approval with a commercial lender.

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What Commercial Buy-to-Let Mortgages Are and How They Work

Commercial buy-to-let mortgages are similar to residential buy-to-let mortgages, but they are designed for commercial properties. These mortgages allow you to let your property to commercial tenants, not residential ones. If your property will be used for both commercial and residential purposes, you may need a semi-commercial mortgage instead.

Interest-only commercial buy-to-let mortgages are common, where your monthly payments only cover the interest on the loan, while the capital amount remains the same throughout the term and is due for repayment at the end of the agreement. Fixed-rate, variable-rate, and discounted-rate commercial buy-to-let mortgages are available.

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How to Get a Commercial Buy-to-Let Mortgage

When getting a commercial buy-to-let mortgage, there are three major steps involved.

Preparing Your Business Case

Your lender will want to understand why you’re borrowing money, how you hope to make money, and whether you can afford to repay the loan. Since you’re buying the property as a business rather than as an individual, you’ll need to provide the business accounts. Ensure that your business case is strong and that you can demonstrate its viability.

Speak to a Commercial Mortgage Broker

Working with a specialist broker who has knowledge of the market can help you navigate the differences between commercial mortgages and residential mortgages. They’ll review your application and make suggestions to strengthen it. They can also help you identify which lender is best for your circumstances.

Finding the Right Buy-to-Let Lender

Your broker will help you identify which lender is best for your circumstances. They can help you if you’re a first-time landlord, have a poor credit history, or need a repayment holiday. Their expertise will ensure you don’t end up paying more than you need to.

Ensure that you understand the repayment terms, capital repayment, mortgage term, and interest-only options before making a decision. Make sure you can afford the mortgage payments and set up a standing order to ensure you don’t miss any payments.

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Application Requirements

When applying for a commercial mortgage, lenders will assess your application based on several criteria. These may include the size of your deposit, your expected rental income, your experience as a commercial landlord, and your trading history. Different industries also have different levels of risk, which lenders may take into account.

To be eligible for a commercial mortgage, you will usually need to have a deposit of at least 25% of the property value. Additionally, your monthly rental income will need to be at least 125% of your mortgage repayments. Lenders also prefer applicants who have previous experience as a commercial landlord and a solid track record. If you’re buying the property through a limited company, your lender will need to see evidence that the business is profitable.

If your application has weaknesses, such as a lack of experience or trading history, or a small deposit, your broker might suggest ways to offset the risk the lender will be taking. For example, they might recommend putting up additional collateral, such as securing the debt against a residential property or a business asset.

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Rates and Costs

How much will your mortgage cost?

When it comes to commercial buy-to-let mortgages, the fees and interest rates can be higher than those for residential mortgages. This is because commercial mortgages are considered higher-risk to lenders. Other fees, such as arrangement fees and valuation fees, can also be higher than those for residential mortgages, reflecting the complexity of arranging a commercial mortgage.

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Remortgaging a Commercial Buy-to-Let Property

If you have a commercial buy-to-let mortgage, you may want to consider remortgaging at the end of the mortgage term. As most commercial buy-to-let mortgages are interest-only, you’ll still owe the original amount borrowed at the end of the term. By remortgaging, you can repay the loan and potentially get a better mortgage rate.

Since you have more experience as a commercial landlord now, you can use this to your advantage when shopping around for a new mortgage deal. You should have accounts to show that you’ve been successful in letting the property at a profit, which can help you get a better mortgage rate.

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Get Matched with a Commercial Buy-to-Let Specialist

Partnering with the right broker can be a game-changer when applying for a commercial buy-to-let mortgage. A specialist broker can help you find the best rate, expedite the process, and increase your chances of approval on the first try. It’s crucial to work with someone who has the exact experience you need, as a broker who helped you buy your home may not have the same expertise to secure this type of mortgage.

Don’t let the complexities of commercial buy-to-let mortgages discourage you from investing in your future. Work with a specialist broker who can help you navigate the process with confidence and clarity.

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Frequently Asked Questions

What are the current commercial buy-to-let rates available?

The current commercial buy-to-let rates available vary depending on the lender, the borrower’s creditworthiness, and the property being purchased. Rates may be fixed or variable. It is important to shop around and compare rates from different lenders to find the best deal for your specific situation.

Which lenders offer the best commercial buy-to-let mortgages?

There are many lenders that offer commercial buy-to-let mortgages, including major banks and specialist lenders. The best lender for you will depend on your specific needs and circumstances. It is important to compare rates, terms, and eligibility requirements from different lenders to find the best option for you.

What are the differences between commercial buy-to-let mortgages and standard buy-to-let mortgages?

Commercial buy-to-let mortgages are used to purchase commercial property, such as office buildings, retail space, or industrial warehouses, that will be let to businesses. Standard buy-to-let mortgages are used to purchase residential property that will be let to individual tenants. Commercial buy-to-let mortgages typically have higher interest rates and stricter eligibility requirements than standard buy-to-let mortgages.

Can I purchase a commercial property with a buy-to-let mortgage?

Yes, it is possible to purchase a commercial property with a buy-to-let mortgage. However, commercial buy-to-let mortgages typically have stricter eligibility requirements and higher interest rates than standard buy-to-let mortgages. It is important to research and compare different lenders to find the best option for your specific situation.

How long does it typically take to secure a commercial mortgage?

The time it takes to secure a commercial mortgage can vary depending on the lender and the borrower’s circumstances. In general, the process can take several weeks to several months. It is important to start the process early and be prepared to provide detailed financial information and documentation.

What are the eligibility requirements for a commercial buy-to-let mortgage?

The eligibility requirements for a commercial buy-to-let mortgage can vary depending on the lender and the specific property being purchased. In general, lenders will consider factors such as the borrower’s creditworthiness, the value of the property, and the potential rental income. Some lenders may also require a minimum deposit or proof of income. It is important to research and compare different lenders to find the best option for your specific situation.

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