Can I get an interest-only commercial mortgage?

On investment property, frequently — commonly for a five-year term with a review, sometimes longer where the lease supports it. On owner-occupied premises it is less common and usually part-amortising instead. Interest only improves cash flow and increases total cost. It also concentrates risk at the end of the term, when the balance has to be refinanced or repaid in full.

My accounts show low profit because of directors' pay. Does that rule me out?

No. Lenders add back directors' salary and dividends, pension contributions, depreciation, amortisation and genuine one-off costs to reach an adjusted figure. A business that looks marginal on filed profit is often comfortably affordable once adjusted. What matters is evidencing the add-backs. An accountant's letter and clean management accounts do most of that work.

Will a lender take a property with a short lease or an unusual tenant?

Often, at a lower loan to value and a shorter term. A two-year unexpired lease to a strong covenant is a different case from the same term to a new company with no filed accounts, and both differ from vacant possession. Where the tenant is the weak point, some lenders will look through to your wider portfolio or trading business instead. That is a placement question, and it is why the lender is chosen before the application goes in.

Can I buy my trading premises through a pension?

A SIPP or SSAS can buy commercial property and lease it back to your trading company, and the pension can borrow up to 50% of its net asset value to do it. It is a well-established structure with real tax advantages. It also has hard rules on rent, valuation and connected-party transactions, and needs your pension trustee and accountant involved from the start. We arrange the borrowing; the pension advice must come from your regulated adviser.

Commercial mortgages

Long-term debt secured on commercial property, repaid from trading profit or rental income over a term of years rather than from a sale.

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A commercial mortgage is underwritten on whether the income covers the debt, and on how confident a lender is that the income continues. The property matters, but the income story comes first — and presenting that story well is the part we can genuinely improve for you.

The parameters

Where this product sits.

Ranges across the market, so you can sanity-check any quote — ours or anyone else’s — before you take it seriously.

Owner-occupied LTV: Up to 75%; Higher than investment, because the occupier and the borrower are the same covenant.
Investment LTV: 65–75%; Driven by the lease: unexpired term, tenant covenant strength and break clauses.
Debt service cover: 125–150%; Rent or adjusted profit against the loan payment, stress tested well above the rate you will pay.
Term: 5–25 years; Amortising, part-amortising or interest only. Interest-only terms are shorter and priced higher.
Arrangement fee: 1–2%; Plus valuation, legals and, on many facilities, an early repayment charge during the fixed period.

These are indicative market ranges rather than a quotation — they are here so you can sanity-check any offer you are shown. Your own terms will be priced on the asset, the borrowing entity, your trading history and the exit, and we will put real figures in front of you on the first call.

Typical cases

What it is used for.

Buying the premises you occupy
Often cheaper monthly than the rent, and the asset ends up on your balance sheet rather than your landlord's. The comparison to run is total cost of ownership against rent, not rate against rate.
Commercial investment purchase
Offices, industrial units, retail parades and mixed-use. Priced on the lease, the tenant and the unexpired term far more than on the postcode.
Releasing equity from a property you own
Raising working capital, funding an acquisition or buying out a shareholder against premises already held.
Refinancing away from a bridge
The planned exit for most bridging cases. Agree the term facility's criteria before the bridge is drawn, not after.

In detail

How it works in practice.

How affordability is assessed

For an owner-occupier, the lender works from adjusted net profit — profit before tax, with directors' remuneration, depreciation, amortisation and one-off items added back, and the rent you will no longer pay treated as available. Two to three years of filed accounts plus current management figures is the standard evidence.

For an investment purchase, the test is the rent against the payment, stressed. A lender quoting 7% will typically test affordability at 9% or 10%, and require the rent to cover that stressed payment by 125% to 150%.

This is why a property that looks affordable on the actual payment can still be declined. Running the stressed calculation before submission, not after, is the difference between one application and three.

What the lease does to the loan

On an investment purchase, the lease is the loan. A ten-year unexpired term to an established covenant supports a longer facility at a better rate than the same building let on a rolling twelve-month agreement, even where the rent is identical.

Break clauses are read as the effective term. A fifteen-year lease with a tenant-only break at year three is a three-year lease as far as most credit committees are concerned, and the facility will be sized and termed accordingly.

Vacant possession is fundable but different: it is priced on the property and on your ability to service the debt without rent, which usually means a lower LTV and a shorter term.

Rate structure, and the cost of certainty

Commercial rates are either fixed for a period or variable over Bank of England base rate or SONIA. A fixed rate buys certainty and usually costs a premium plus an early repayment charge during the fixed period.

The right choice depends on what you intend to do with the property. If there is any prospect of selling, restructuring or repaying early within the fixed period, the early repayment charge can cost more than the rate saved.

We model both against your actual plan for the asset, including what happens if you sell in year three. That comparison is rarely in a lender's illustration.

Before you sign

Four things worth checking.

Stress rates, not headline rates
Affordability is tested well above the rate you pay. Size the borrowing from the stressed figure.
Early repayment charges
Common on fixed facilities and often several per cent of the balance. They matter most on the property you are most likely to sell.
Debentures and personal guarantees
A floating charge over the company and directors' guarantees are standard on corporate borrowing. Take independent legal advice on scope before signing.
Valuation on a specialist asset
Trading premises valued on a going-concern basis can be reported well below what you are paying if the trade is not evidenced. Budget for that possibility.

Questions