Commercial Buy-to-Let Mortgages

Explore commercial buy-to-let mortgages and how a mortgage broker can help secure the best possible rate

What type of commercial property are you looking to mortgage?

Home Commercial Mortgages Commercial Buy-to-Let Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: April 8, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

April 8, 2024

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What commercial buy-to-let mortgages are and how they work

Commercial buy-to-let mortgages are very similar to residential ones, except (as the name suggests) that you can only let your property to commercial tenants, not residential. If your property will be used for both commercial and residential purposes, you’ll likely need a semi-commercial mortgage instead.

Possible examples of when you might use this type of mortgage include letting out the following properties to commercial tenants:

Commercial buy-to-let mortgages are usually interest-only, meaning that your monthly payments will 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. You can get fixed-rate commercial buy-to-let mortgages as well as variable-rate and discounted-rate.

How to get a commercial buy-to-let mortgage

Getting a commercial buy-to-let mortgage involves more paperwork and more lender checks than for a residential version. It’s sensible to work with an experienced broker who can guide you through this process swiftly. If you’d like us to put you in touch with a commercial mortgage broker, contact us today.

Your broker will help with the following key steps:

1. Preparing your business case

With any loan for business purposes, your lender will want to understand how you hope to make money and whether you can afford to repay the loan. In the case of a commercial buy-to-let mortgage, that means they’ll need to see who you plan to let the premises to and what rental income you’ll receive. Your broker will review the details with you and make suggestions to strengthen your application.

2. Checking your personal and business credit history

Your lender will need to assess the creditworthiness of both you and your business (if you are buying through a limited company, as most commercial landlords do). Your broker will check for any issues that could affect your application and advise you on what steps to take.

3. Finding the right buy-to-let lender

Your broker will help you identify which lender is best for your circumstances. For example, if you’ll be a first-time landlord, some lenders are more likely to approve your application than others. The same is true if you have a poor credit history. Their expertise will ensure you don’t end up paying more than you need to.

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Application requirements

Requirements and eligibility criteria vary between different commercial lenders, but your application could be approved or declined based on any of the following:

  • Your deposit. You’ll usually need at least 20-25% of the property value and some lenders may require more depending on your circumstances.
  • Your expected rental income.  Your monthly rental income will need to be at least 125% of your mortgage repayments. Again, some lenders may require more.
  • Your experience.  Lenders prefer applicants who have previous experience as a commercial landlord and a solid track record. It’s difficult – but not impossible – to get this type of mortgage as a first-time landlord.
  • Your trading history. If you’re buying the property through a limited company, your lender will need to see evidence that the business is profitable.
  • Your chosen industry.  Different industries have different levels of risk, so lenders might specialise in or exclude certain examples.

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

Rates and costs

Commercial buy-to-let mortgage rates are usually higher than residential rates. The interest rate you’ll be offered would typically be 1%-1.5% above standard mortgage rates.
The other fees, such as arrangement fees and valuation fees, can also be higher than residential mortgages, which reflects the complexity of arranging a commercial mortgage.

Make sure you also consider arrangement and valuation fees, which tend to be higher than residential mortgages. Find out more about commercial mortgage rates in our guide.

How much will your mortgage cost?

You can use the mortgage repayment calculator below to see how much your repayments will be based on the size of your loan and the expected mortgage rate.

Buy-To-Let Mortgage Calculator

This calculator can tell you the monthly and overall cost of your mortgage, based on the loan amount, interest rate, and term length.

Enter the amount you're borrowing
Between 3.5%-6% is the average rate for a commercial buy-to-let mortgage
Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms

Your Results:

The monthly repayments on a mortgage would be

The total amount paid at the end of your mortgage term would be

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Can you remortgage?

It’s usually easier to remortgage if you’re already on a commercial buy-to-let deal, as you’ll have more experience as a commercial landlord than you did when you first secured the mortgage, and you should have accounts to show that you’ve been successful in letting the property at a profit in that time. All of this can help you to get a better mortgage rate.

How Online Mortgage Advisor can help you secure a commercial buy-to-let mortgage

It takes skill and experience to make an application for a commercial buy-to-let mortgage that includes all the details that lenders are looking for. Working with the right broker can help you to get it right the first time, and speed up the approval process.

A broker who helped you buy your home may not have the expertise to secure this type of mortgage. If you’d like us to connect you to someone who specialises in commercial buy-to-lets, you can give us a call on 0808 189 2301 or make an enquiry online.

Ask us a question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different types of commercial mortgages.

Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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