If you are purchasing a commercial property for your own business use—such as offices, a warehouse, or any type of trading premises—you will require an owner-occupier commercial mortgage.
Below, we explore the situations where this type of mortgage is needed, how it operates, and the steps to secure one.
What is an owner-occupier commercial mortgage?
An owner-occupier commercial mortgage is designed for purchasing property that will be used directly by your business. In some instances, it may even allow the purchase of multiple properties under one mortgage, provided all are used for trading purposes.
Common scenarios where an owner-occupier commercial mortgage might be required include:
- Purchasing a property for a newly established business to operate from
- Acquiring an additional property for an expanding business
- Buying the premises your business currently rents or operates from to reduce costs
- Remortgaging an existing owner-occupied property
- Renovating or expanding your current business premises
This type of mortgage offers flexibility for businesses looking to secure or enhance their operational space.
With an owner-occupier business mortgage, as with any commercial mortgage, you have the option to choose between capital repayment or interest-only plans. Interest-only mortgages are often more suitable if your priority is to minimise monthly costs, as you only pay the interest during the term and repay the capital at the end.
What types of businesses can get them?
A commercial mortgage can be obtained not only as an individual but also through various types of trading entities, including:
- Partnerships (including LLPs)
- Limited companies
- Offshore companies
- SPVs (Special Purpose Vehicles)
- Pension funds or trusts
Each structure may have specific requirements or implications, so it’s important to choose the one that aligns best with your business needs and financial strategy.
Eligibility criteria
Commercial owner-occupier mortgages are evaluated based on risk, with lower-risk borrowers typically benefiting from better interest rates and access to a broader range of lenders.
When applying for a commercial mortgage, you will need to provide a business plan and generally meet the following criteria:
- Deposit: A minimum deposit of 25% is typically required, although higher borrowing may be possible if you offer additional asset-based security.
- Affordability: Lenders assess affordability based on business profits, often using EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation). Your EBITDA will typically need to exceed monthly repayments by 125-250%. For new businesses, lenders may rely on projected income instead.
- Industry Experience: While new businesses can secure a commercial mortgage, having a solid trading history in your sector can strengthen your application. Lenders also evaluate the nature of your business to assess its potential longevity.
- Credit History: While there are options for borrowers with poor credit, a strong credit score gives you access to a wider range of competitive mortgage products.
Careful preparation and addressing these criteria can significantly improve your chances of securing favourable terms.
Each lender applies their own unique criteria when assessing commercial mortgage applications. To find the financing option best suited to your needs, it is highly beneficial to consult with an experienced commercial mortgage broker, who can guide you toward the most appropriate lender and terms.
How to get an owner-occupier commercial mortgage
When seeking a commercial owner-occupier mortgage, it’s advisable to consult a broker specialising in commercial mortgages, such as our team. Preparing a strong business plan to support your application can be particularly challenging, especially if you’re a new business.
We’re here to assist you in compiling the necessary supporting documentation after identifying the best commercial mortgage deal for your needs.
Before applying, it’s a good idea to have the following ready:
- Business bank statements*
- Business tax returns*
- Business plan and projected future earnings – projections are especially critical for start-up businesses
By having these documents prepared, you can streamline the application process and strengthen your case with lenders.
* You may also need to have these available in your own name, if you’re applying as an individual
Available lenders and interest rates
As a whole-of-market mortgage broker, we can access deals from high street lenders, challenger banks, and specialist commercial mortgage providers.
It’s crucial to carefully compare all the lenders we work with to ensure you secure the best deal for your business. High street lenders often have stricter criteria, whereas specialist lenders and challenger banks—many of which operate exclusively through intermediaries like us—offer greater flexibility in who they are willing to lend to. However, their interest rates tend to be higher.
Owner-occupier commercial mortgages typically come with lower interest rates than those for other purposes, such as purchasing investment properties. That said, the exact rate you pay will depend on several factors, including your business’s perceived level of risk. For example, low-risk businesses, such as medical or legal practices, may benefit from more favourable rates compared to higher-risk businesses, like niche retailers.
The right broker's expertise ensures we can match you with the most suitable lender and terms for your unique circumstances.
Owner-occupier mortgages vs. renting a business premises
One of the key advantages of using an owner-occupier mortgage to purchase your business premises is that it can often be more cost-effective than renting commercial space. However, before deciding whether buying or renting is the best option for your business, it’s essential to carefully evaluate your long-term needs, financial situation, and growth plans.
| Pros of buying property with an owner-occupier commercial mortgage | Pros of renting your commercial premises |
| As owner you can adapt the property to suit your need | There is a smaller initial financial outlay with renting, so you won’t need to find arrangement and legal fees |
| Rent is essentially dead money that you could be re-investing by purchasing property as a business asset, which is likely to rise in value | It’s possible (although less likely) that a business premises you purchase could lose value, which is not a concern when renting |
| No concerns about rental increases or being asked to vacate your business premises | Less financial commitment than a mortgage if you no longer require the premises or business dwindles |
| Mortgage repayments are tax deductible as a business cost | Business rental costs are also typically tax deductible |
Other alternatives to consider
If a commercial mortgage is not a viable option for financing your business endeavour, there are alternative solutions to consider, including:
Bridging Loans
Bridging loans are particularly useful for situations requiring quick financing, such as purchasing a property at auction. These loans are typically faster to arrange than a commercial mortgage but come with shorter repayment terms (usually 1–3 years) and higher interest rates.
Bridging loans can be secured either against the property you intend to purchase or an existing asset.
Remortgaging to Release Equity
You may be able to release equity from an existing commercial property or, in some cases, your residential property to fund a commercial property purchase. However, not all lenders allow residential properties to be used for this purpose.
The released equity can be used to either:
- Purchase a business property outright, or
- Provide a substantial deposit, making a commercial owner-occupier mortgage a more viable option.
Exploring these options with expert advice can help you identify the best financing solution for your business needs.
Frequently Asked Questions
It is possible—and may even be necessary—to take out a commercial mortgage in your own name if your business has been trading for less than a year. Many lenders require at least 12 months of trading accounts to approve a commercial mortgage under a business name.
When applying for a commercial mortgage personally, lenders will assess both your business and personal finances to determine your suitability. This includes reviewing your personal income, credit history, and any existing financial commitments, alongside your business’s projected or current financial performance.