Commercial Mortgage for First Time Landlords Explained

What is a Commercial Mortgage for First Time Landlords?

A commercial mortgage for first-time landlords is a loan secured against a property intended for business use. Unlike residential mortgages, commercial mortgages are tailored for landlords looking to buy their first rental property in the UK. These mortgages help investors finance shops, offices, warehouses, commercial premises, and semi-commercial properties.

The article is updated as of March 28, 2025

Risk Warnings: Commercial mortgages by referral only. The Financial Conduct Authority do not regulate commercial mortgages.

How Does a Commercial Mortgage Work in the UK?

A commercial mortgage operates similarly to a residential mortgage but with some key differences:

• Loan Amount & Term – Typically, lenders offer up to 75% Loan-to-Value (LTV) with terms ranging from 5 to 25 years.
• Interest Rates – Commercial mortgage rates are usually higher than residential mortgages and can be either fixed or variable rate.
• Repayment Structure – Some mortgages allow interest-only monthly mortgage repayments, while others require full capital and interest repayment.
• Mortgage Products & Lenders – Commercial mortgage lenders include high-street banks, challenger banks, specialist lenders, and private individuals offering flexible approaches.

Eligibility Criteria for First-Time Landlords

Lenders assess several factors when approving a commercial mortgage for first-time landlords, including:

1. Credit History & Personal Income

A good credit score, sufficient personal income, and evidence of deposit funds improve your chance of mortgage approval.

2. Property Type & Investment Plans

Lenders evaluate the type of investment, ensuring it meets their lending criteria and has strong rental income potential.

3. Minimum Deposit & Larger Deposit Benefits

Most lenders require a minimum deposit of 25-40% of the property value, but a larger deposit can improve loan terms.

4. Experience & Previous Letting Experience

Some lenders prefer an experienced landlord, but first-time buyers can still secure funding with a suitable lender.

5. Affordability Assessment & Business Structure

Affordability calculations consider rental income, personal assets, business profits, and maintenance costs.

Steps to Apply for a Commercial Mortgage in the UK

Step 1: Assess Your Financial Position

Before applying, ensure you meet minimum incomeThe minimum income required for a borrower to be eligible fo... requirements, have a stable business tenant, and a solid business structure.

Step 2: Compare Lenders & Mortgage Options

Research various commercial mortgage lenders offering buy-to-let and residential mortgage solutions, including commercial investment mortgages and semi-commercial mortgages.

Step 3: Prepare Necessary Documents

Common documents required include:

• Bank statementsA record of a borrower's financial transactions often requir..., business banking details, and trading company records
• Business plan outlining buy-to-let business or commercial landlord strategy
• Mortgage application details, including property maintenance costs
• Agreement in principle and lender criteria compliance

Step 4: Submit Mortgage Application & Await Approval

Lenders will conduct affordability assessments, background property portfolio checks, and a 180-day valuation before approval.

Step 5: Legal Advice & Completion Process

Upon approval, legal advice ensures all tenancy agreements, lease terms, and property finance conditions are met.

Tips to Increase Mortgage Approval Chances

1. Improve Your Credit Score & Personal Circumstances

Pay off debts, maintain business tenant stability, and provide personal circumstances evidence.

2. Save for a Larger Deposit

A higher deposit lowers the lender’s risk, improving mortgage interest rates and approval chances.

3. Seek Expert Brokers & Mortgage Advice

Consulting a commercial mortgage broker, CeMAP-qualified mortgage advisor, or buy-to-let expert helps navigate lending criteria and mortgage options.

Frequently Asked Questions

Q1: Can a first-time landlord get a commercial mortgage?

Yes, but they may face stricter requirements such as higher deposits and interest rates.

Q2: What is the typical deposit for a commercial mortgage?

Most lenders require between 25-40% of the property’s value.

Q3: Are interest-only commercial mortgages available?

Yes, some lenders offer interest-only options, but they typically require a strong business case and clear affordability calculations.

A commercial mortgage for first-time landlords can be a great investment strategy in the UK. By understanding the process, meeting lender criteria, and choosing the right mortgage products, first-time commercial property investors can successfully finance their buy-to-let properties. Need mortgage advice? Contact an experienced broker today!