Mortgage guide
Why are commercial mortgages more expensive?
Commercial mortgages are generally more expensive than residential or buy-to-let mortgages, and this comes down to several key factors related to risk, complexity, and how each deal is assessed.
- Published
- 4 Aug 2026
- Last reviewed
- 4 Aug 2026
- Reading time
- 3 min
Why are commercial mortgages more expensive?
Commercial mortgages are generally more expensive than residential or buy-to-let mortgages, and this comes down to several key factors related to risk, complexity, and how each deal is assessed.
One of the main reasons is that commercial lending is seen as higher risk. Property values in the commercial sector can be more volatile, and income is often tied to the performance of a business or the reliability of a tenant. If a business fails or a lease isn’t renewed, the property could be left vacant, which poses a greater risk to lenders compared to residential properties, where demand is usually more stable.
Another important factor is the individual assessment process. Commercial mortgage rates aren’t usually off the shelf, they’re based on bespoke underwriting. Lenders look closely at the business’s financial accounts, and things like the loan-to-EBITDA ratio (earnings before interest, tax, depreciation, and amortisation) can heavily influence pricing. A high loan-to-EBITDA ratio signals greater risk and may result in a higher interest rate or even a rejection.
For investment properties, the strength of the tenant known as the covenant strength also plays a major role. A lease with a strong, well-known tenant (like a supermarket or bank) is seen as lower risk and may attract a better rate. On the other hand, a weaker or unknown tenant may lead to higher rates, as lenders are less confident in the reliability of rental income.
Because of these risk factors and the custom nature of each loan, commercial mortgages tend to come with higher interest rates and fees than both residential and buy-to-let mortgages. Each deal is unique, and lenders price according to the risk profile of the property, the borrower, and the income being relied on to service the loan.
Commercial mortgage calculator
Choose owner occupier for a business buying or refinancing premises it trades from, assessed on adjusted net profit before tax from the latest accounts, or investment for property let to tenants, assessed on lease income.
Commercial mortgage criteria
For context, these are the wider product terms covered by this guide. Availability and eligibility depend on your circumstances and the lender.
| Criteria | Detail |
|---|---|
| Max Loan to Value (LTV) | 80% LTV Care Home Mortgages, 100% LTV Medical Commercial Mortgages, 75% Commercial Investment |
| Max Term | Up to 40 years |
| Completions | From 4 weeks |
| Repayment options | Capital repayment and Interest only |
| Commercial mortgage rates | From 6.19% |
| Rate options | Variable, Base Rate Tracker, 2, 3 or 5 year fixed mortgage options |
| Valuation methods | Going concern/Investment (Market value 1, MV1), MV2, MV3 or bricks and mortar |
| Flexible Leases | Rolling leases, weak covenants and short time remaining accepted |
| Adverse credit | Accepted on some products on a case by case basis |
| Locations | Available in England, Scotland, Wales and Northern Ireland |
| Experience | Not required on certain products |
For context, these are the wider product terms covered by this guide. Availability and eligibility depend on your circumstances and the lender.
| Feature | Detail |
|---|---|
| Max Loan to Value (LTV) | 65% |
| Product fee | 5% (4.74% for existing customers) |
| Fixed rate (5 years) | 6.34% |
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Frequently asked questions
Can you get a 90% commercial mortgage?
Yes, 90% loan-to-value commercial mortgages are possible, but only in limited sectors such as healthcare properties, pharmacies, or certain convenience stores with strong trading history. For most other commercial properties, maximum lending is typically capped at around 70% to 75% LTV.
What is a commercial mortgage?
A commercial mortgage is an asset-backed loan secured against commercial, semi-commercial or large-scale investment property. Lenders assess it on income sustainability and asset risk rather than personal income multiples, and pricing is set case by case, usually as a margin over Bank Rate.
What is commercial lending?
Commercial lending refers to loans secured against property used for business purposes, such as offices, retail units, or industrial premises. Terms, rates, and deposits are individually assessed and typically differ from residential mortgages.
What is a commercial bridge?
A commercial bridge is a short-term, property-backed loan used to purchase, refinance, or stabilise commercial or mixed-use property when a standard commercial mortgage is not immediately available. It is exit-driven, typically runs for 3-12 months, uses rolled-up interest, and is repaid through sale or refinance rather than ongoing affordability.
What is a semi-commercial mortgage?
A semi-commercial mortgage is a loan on a property that combines commercial and residential parts, such as a shop with a flat above, and is also called a mixed use mortgage. Lenders assess the combined rental income, the residential proportion and the commercial tenant's lease, or the business where the owner trades from the premises, and it is usually arranged with commercial or specialist lenders. A loan to an individual or trustees is a regulated mortgage contract where at least 40% of the property, measured by floor area, is lived in by the borrower or a related person; otherwise it is usually unregulated business lending.
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