Commercial Mortgage LTV Explained: What It Means and How It Affects Your Deal

LTV does more than decide whether you can borrow. It also affects the interest rate you are offered, so merely getting below a lender’s maximum can still leave you with an unnecessarily expensive loan.

Moving from 75% LTV to below 60% LTV can cut your interest rate by 75 basis points or more. On a £500,000 loan over 20 years, that difference compounds to tens of thousands of pounds. LTV is the primary lever lenders use to price your deal.

Commercial Mortgage LTV at a Glance

What it is: Loan-to-Value (LTV) is the size of your loan expressed as a percentage of the property value. An 80% LTV means you are borrowing 80% and contributing 20% yourself.

Typical range: 60%–75% for most commercial mortgages. Up to 80% for some owner-occupiers, depending on property type and debt service cover.

Best for: Borrowers with a 25%–35% deposit, trading accounts that support the requested loan, and a property in a mainstream sector (offices, industrial, retail).

Not ideal for: High LTV applications on specialised property (care homes, farms, leisure). Lenders cap these at 60%–65% LTV, and rates increase sharply above 70%.

The rate reality: A borrower at 75% LTV will typically pay 25–75 basis points more than a borrower at below 60% LTV. On any loan above £250,000 that gap is real money.

The constraint lenders do not advertise: Your LTV may pass, but your Interest Coverage Ratio (ICR) may not. On lower-yield investment properties, ICR often becomes the binding limit on how much you can borrow, not LTV. See the ICR section for the full picture.

What Is LTV in a Commercial Mortgage?

How LTV Is Calculated

LTV is straightforward in principle. Divide the loan amount by the property value, then multiply by 100.

If you want to buy a commercial property worth £800,000 and borrow £560,000, your LTV is 70%.

The lender calculates LTV using whichever is lower: the purchase price or its independent RICS valuation. Your estimate and the asking price do not determine how much it will lend.

If your RICS valuer comes in below the price you are paying, the lender will lend against the lower figure.

A down-valuation reduces the loan available without reducing the price you have agreed to pay, so it can leave you needing more cash after legal work has begun. We flag it as the LTV risk to understand before you instruct solicitors.

Commercial LTV vs Residential LTV

Residential mortgages for owner-occupiers can go to 95% LTV, sometimes higher. Commercial mortgages cap well below that: 75% is the mainstream ceiling for most products, and many lenders start their pricing models at 60%.

We put the gap down to genuine differences in resale risk rather than lender conservatism for its own sake. Commercial buildings are less liquid: a town-centre flat has a broad market of buyers and standardised lending, while a light industrial unit in a regional business park does not.

If a lender needs to recover its money through a forced sale, commercial property takes longer to sell, values fluctuate more with economic cycles, and the pool of buyers is narrower. Lenders price that risk into the LTV cap and the rate.

There is also no equivalent of Help to Buy or government guarantee schemes for commercial property, which further limits how far lenders are willing to stretch their exposure.

Why Lenders Weight LTV Heavily in Commercial Deals

The LTV cap is a direct measure of the lender’s cushion. At 75% LTV, the lender has a 25% buffer before the property value would need to fall far enough to leave them exposed on a default.

At 80% LTV, that buffer is 20%. On a volatile asset class, those five percentage points matter.

Commercial property values fell by about 44% from peak to trough between June 2007 and July 2009 on IPD figures, and fell again in 2022–2023 as interest rates rose. Lenders who stretched to higher LTVs found themselves with facilities where the loan balance exceeded the property value.

We find the 75% market norm reflects that institutional memory.

How Does LTV Affect Your Deposit?

LTV and deposit are two sides of the same equation. Every percentage point of LTV you take on is a percentage point of equity you are not contributing yourself. The maths is fixed: what changes between lenders is whether they will lend at a given LTV, and what they charge if they do.

On a £500,000 property: a 75% LTV loan requires £125,000 equity. A 60% LTV loan requires £200,000, a difference of £75,000 in cash. That sounds straightforwardly worse, but the 60% LTV borrower typically saves 50–75 basis points on their rate. On a £300,000 loan that is roughly £1,500–£2,250 per year in reduced interest: a meaningful return on the extra capital committed, assuming you have it available.

These percentages are mathematical equivalents, not promises. A lender might publish a 75% LTV maximum for your property type and lend you only 70% after applying its income coverage test or reviewing the building’s condition. Your actual deposit requirement may be higher than the headline LTV maths suggests.

Typical LTV Limits for Commercial Mortgages in the UK

Owner-Occupier Commercial Property

For a trading business buying its own premises, the mainstream LTV ceiling is 75%. HSBC states this explicitly: borrow up to 75% of the purchase price or professional valuation, whichever is lower. NatWest applies the same guideline, requiring a minimum 25% deposit as standard.

Barclays assesses commercial owner-occupier applications individually and does not publish an LTV ceiling for them.

Santander‘s owner-occupier commercial mortgage is available from £25,001 for businesses with a turnover above £250,000. Santander does not publish an LTV ceiling for it.

Allica Bank is the notable exception at the higher end. Its product guide for brokers (24 September 2026) sets 75% for most owner-occupied property, rising to 80% on offices, retail units, factories, industrial units and warehouses where the business shows twice the debt service cover. An additional 5% may be available to owner-occupiers in accountancy, veterinary, architecture and surveying, manufacturing, machining, and storage or distribution.

Handelsbanken underwrites commercial lending entirely on a bespoke basis through their relationship manager model. No published LTV cap applies: your rate and maximum loan are determined through direct negotiation. We verified the lender figures in this section against published criteria as of October 2026.

Commercial Investment Property

Investment deals (where you are buying commercial property to let to a third party) attract lower LTV caps than owner-occupier deals across the board. Lenders view investment property as higher risk: if the tenancy fails, rental income stops, and the loan must be serviced from other sources.

Barclays applies a more conservative ceiling for commercial investment than for owner-occupier use: up to 65% LTV from their criteria. HSBC only lends to real estate businesses with a trading turnover above £15 million. Allica caps commercial investment at 75% on most property types. NatWest says the deposit for a commercial buy-to-let mortgage depends on individual circumstances.

Santander explicitly excludes real estate investment from their standard commercial mortgage product entirely: it is not available regardless of LTV.

The practical implication: if you are acquiring a commercial investment property, treat a 25%–35% deposit as the market baseline.

Anything less than a prime asset with a financially secure long-term tenant is likely to require a larger deposit. We flag this because borrowers coming from residential mortgages can otherwise budget too little equity.

Semi-Commercial and Mixed-Use Property

Semi-commercial property (the classic example is a retail unit with a residential flat above) sits in a different underwriting lane. Valuers must assess two distinct elements and assign a blended value, which adds complexity and typically suppresses the available LTV.

Allica Bank lends up to 75% LTV on semi-commercial investment. Specialist lenders and brokers can access up to 80% LTV where the residential element is substantial and the commercial element is on a long lease with a financially secure tenant.

For mainstream semi-commercial investment without that residential occupation, 70%–75% LTV is the working assumption. Where the commercial element is vacant or on a short lease, lenders will pull back further.

How Property Type and Condition Change the Maximum

Your property type can reduce the available LTV even when the business itself is financially sound. Lenders also consider how readily the building could be sold if the loan defaults.

Industrial and warehousing property typically attracts the most favourable LTV treatment. Demand from logistics and light manufacturing tenants has remained robust, and the asset class is less volatile than retail. Allica‘s product guide reflects that view: it lists 80% for owner-occupied factories, industrial units and warehouses where the business shows twice the debt service cover, with up to 5% more for manufacturing and storage or distribution businesses.

Offices attract reasonable LTVs in most cases, though lenders have become more selective about older stock with poor energy ratings. EPC rating now influences lender appetite: some lenders, including Barclays, offer discounted rates for properties at EPC B or above, and underwriting can tighten on F or G-rated buildings.

Retail premises face the lowest mainstream LTVs. A minimum 30%–35% deposit (implying a 65%–70% LTV ceiling) is a consistent market norm for traditional high street retail, driven by years of structural pressure on the sector and higher vacancy risk.

Leisure and hospitality (hotels, restaurants, pubs) are assessed on the specific business and trading position rather than pure property metrics. Lenders will fund these assets, but they apply greater scrutiny to operational history and income sustainability.

Specialised assets with limited alternative use (care homes, farms, petrol stations) typically attract the lowest LTV caps, in the 60%–65% range, because the number of viable buyers in a forced sale is narrow.

Uninhabitable or derelict property is generally a hard barrier. Most commercial lenders require the property to be in a lettable or usable condition on day one.

If you need to fund a purchase and refurbishment together, the right product is a bridging loan or development finance, not a standard commercial mortgage.

How LTV Affects Your Rate and Loan Terms

Rate Bands and LTV Thresholds

Commercial lenders rarely publish a rate for each LTV band. You will usually need an individual quote, either directly or through a broker. All else being equal, a higher LTV generally means a higher rate because the lender has less protection if the property falls in value.

Borrowers below 55% LTV access the most competitive pricing. In 2026, this looks like approximately 5.25% fixed over five years, or around Bank of England base rate plus 1.85% for a variable rate product.

These are market reference points, not advertised rates: your actual rate will depend on the lender, your business financials, the property type, and the term.

At 75% LTV, indicative five-year fixed pricing moves to around 6.00%. That 75 basis point differential from below 55% to 75% LTV translates directly into your borrowing cost.

Moving between the 60% and 70%–75% bands typically adds 25–50 basis points to your rate, all else being equal.

The jump from 70% to 75% LTV often triggers a more significant pricing step than moving within a band: it crosses a threshold that many lenders treat as a meaningful risk boundary. We find this boundary is worth respecting when you structure your deposit.

How Lender Risk Appetite Moves With LTV

Different lenders treat high LTV differently. Some impose a hard cap and will not lend above it regardless of borrower strength. Others will lend to a higher LTV but price the risk into the rate.

Allica Bank sets its cap by property type, but borrower strength can lift it: most owner-occupied trading property goes to 75%, or 80% where the business shows twice the debt service cover.

Barclays publishes an investment ceiling of up to 65% LTV. The other high street banks we checked publish no investment LTV figure.

Specialist lenders are more willing to go higher, but at a cost. Clifton Private Finance and other specialist broker platforms report access to 80%–85% LTV in exceptional owner-occupier cases, sometimes quoted as 100% with additional security.

We find the 100% figure in broker marketing almost always means 70%–75% on the subject property with the shortfall secured against another asset you own.

What a High LTV Costs in Practice

The rate differential between LTV tiers is not abstract. On a £500,000 commercial mortgage over 20 years, a 75 basis point rate increase adds approximately £3,750 in annual interest. Over a five-year fixed term, that is £18,750 in additional cost before any consideration of compounding or refinancing.

On a £1,000,000 facility, the same rate premium doubles to £7,500 per year: more than many businesses spend on professional fees in a year.

Asset quality can partially offset the rate premium. A borrower at 75% LTV on a prime, fully-let office with a five-year lease to a solvent tenant may be priced better by some lenders than a borrower at 60% LTV on a vacant industrial unit.

LTV usually carries the most weight, but it does not operate alone. Property condition, income and the quality of any tenant can still change the rate or the amount a lender is prepared to offer.

LTV and ICR: How the Two Constraints Interact

What Is the Interest Coverage Ratio?

The Interest Coverage Ratio (ICR) measures whether the property’s income covers the loan’s interest cost, with a buffer on top.

The basic calculation: annual net rental income (or business profit for owner-occupiers) divided by the annual interest payment on the loan. If the result is 1.30, the income covers interest costs 1.3 times over, or 130%.

ICR matters because it is a separate test from LTV, and we find it often binds first on commercial investment properties. You can meet the LTV cap and still be refused the loan you want because the property’s yield is not high enough to satisfy the ICR requirement.

When ICR Becomes the Binding Constraint

ICR becomes the limit when the property qualifies on value but its rental income cannot support the requested loan. The worked example shows how that can reduce the amount available.

Suppose you want to buy a commercial investment property for £600,000 at 70% LTV: a £420,000 loan. The property yields 5% gross per year: £30,000 in annual rent. Your lender requires 130% ICR.

At a product rate of 6%, your annual interest on a £420,000 loan is £25,200. Your ICR is £30,000 ÷ £25,200 = 1.19. You have missed the 130% requirement.

To meet 130% ICR on a £30,000 income at 6%, your maximum loan is approximately £385,000: an effective LTV of 64% on a £600,000 property, not 70%. Your LTV headroom was not the binding constraint. Your ICR was.

Allica Bank is the one lender we checked that publishes its cover requirements. Barclays, HSBC and NatWest do not publish an interest cover figure on their commercial mortgage pages.

• Allica Bank: 130% debt service cover for owner-occupied and commercial investment loans, and 120% for semi-commercial investment. Fixed rates are tested at the pay rate, and variable rates at the pay rate plus 2%.

Stress-Testing Your LTV and ICR Position Before You Apply

The stress test rate is not the same as the product rate. Lenders calculate ICR against a higher rate than you will actually pay: this is intentional, to ensure the loan remains serviceable if rates rise.

Allica, for example, tests variable-rate loans at the pay rate plus 2%. On a variable pay rate of 6%, the cover test runs at 8%, not 6%.

A deal that looks affordable at the quoted rate can still fail the lender’s stressed ICR calculation. The closer you are to the threshold, the more likely that higher test rate is to reduce the loan available.

We recommend running the numbers at a stress rate 2%–3% above your expected product rate before you approach a lender.

If the lender requires 130% interest cover, clearing that level at its stressed rate meets that part of the affordability test. Other lending criteria still apply. If it does not, you either need a lower loan amount, a higher-yield property, or a lender with a more favourable ICR threshold.

Some lenders will consider top-slicing: using other business income or personal income to cover an ICR shortfall. This is worth asking about if the rental income alone does not carry the test, but it brings additional scrutiny of your personal financial position.

How to Improve Your LTV Before Applying

Increasing Your Deposit or Equity Contribution

The most direct route to a lower LTV is a larger deposit. If you can move from 75% to 65% LTV, you cross a significant pricing threshold with most lenders and reduce the annual cost of the facility.

The obstacle is finding the cash: most businesses do not build large reserves solely to buy property. That makes the timing and source of your deposit part of the financing decision rather than an afterthought.

If possible, apply when the business has enough cash available for the deposit. A profitable trading year or an asset sale may help, but retained profits in the accounts do not necessarily mean cash is available to spend.

Lenders will ask for three years of accounts. If your most recent year is weaker, we find the timing of your application affects both the LTV level you can reach and the ICR position: sometimes by more than borrowers expect.

Family loan arrangements or investor equity participation can supplement your deposit, but lenders will scrutinise the terms.

An interest-bearing loan from a director that ranks behind the commercial mortgage is viewed differently from a genuine equity contribution. Be transparent with the lender and your broker about the source of your deposit.

Using Security in Another Property

If you already own commercial or residential property with equity, some lenders will accept a charge over that property as additional security.

Additional security can support a higher LTV or a lower rate because it improves the lender’s position across both properties. We flag this route because borrowers often focus only on the deposit attached to the new purchase.

The risk you take in exchange is a lien on your existing property. If you default on the commercial mortgage, the lender has the right to enforce against your additional security, which may include your home if it is offered as a cross-charge.

Cross-charging works for some borrowers, particularly those who own an unencumbered commercial property or have substantial residential equity. We do not recommend entering this arrangement without independent legal advice: ensure you understand the enforcement conditions and the lender’s order of priority before agreeing.

Getting the Valuation Right

You can’t inflate a RICS valuation, but you can ensure it is accurate. We recommend providing the valuer with full details of any income, leases, planning consents, and recent comparable transactions.

A valuer working from incomplete information may produce a conservative figure that caps your available loan below what the lender would otherwise offer.

If the first valuation comes in below the purchase price or your expectation, your options are: challenge with additional evidence, accept the lower loan amount, increase your deposit, or withdraw from the transaction.

Most lenders won’t permit a second valuation on the same property at the same time.

Energy efficiency has become a valuation signal. Properties with EPC ratings of A or B can attract valuation uplifts and better lender terms.

If your property is at EPC D or below and you’re planning improvements before applying, completing that work first (and documenting it) may support a higher valuation.

Down-valuation worked example

Suppose you are buying a commercial property at £800,000 and plan to borrow £600,000, which looks like 75% LTV on the purchase price. Your lender instructs a RICS valuation and it comes back at £750,000.

The purchase obligation stays at £800,000. But the lender will only advance £562,500 against a £750,000 valuation at 75% LTV. You need to find an extra £37,500 in cash before exchange. This is the most common way a down-valuation catches buyers: not by killing the deal, but by increasing the equity you need to complete it.

LTV on Commercial Mortgage Remortgages and Refinancing

How LTV Is Calculated on an Existing Property

When remortgaging a commercial property you already own, LTV is calculated against the current market value: not what you paid for it, not what you owe on the original mortgage.

If you bought a property for £500,000 with a £375,000 loan (75% LTV), and it is now worth £700,000 with an outstanding balance of £280,000, your current LTV is 40%.

That lower LTV may help you secure a better rate and leave room for further borrowing within 65%–70% LTV, subject to the lender’s affordability checks and criteria.

The same calculation runs in reverse if values have fallen. If the property you paid £500,000 for is now valued at £400,000, your £375,000 original loan is now at 93.75% LTV on the current value. This is the scenario that triggers covenant breach clauses.

Releasing Equity via a Commercial Remortgage

Equity release on a commercial property (borrowing more against an asset that has risen in value) is straightforward in principle. You refinance to a higher loan amount, using the additional funds for business purposes, investment, or another acquisition.

The constraint is that every pound of equity you release increases your LTV, which increases your rate. A borrower who has spent ten years building equity to below 40% LTV will see their rate increase meaningfully if they remortgage to 65% LTV to release funds.

Factor the higher rate into your cost of capital before treating equity release as cheap money. We flag the long-run cost because a calculation based on your existing rate will understate what the refinanced borrowing actually costs.

It’s not suitable if the funds raised will service existing debt at a higher rate than the commercial mortgage: that is a short-term fix that creates a longer-term cost.

It’s also not suitable if the released equity will be deployed into a riskier asset that fails, leaving you with a higher LTV on the property and no new income to show for it.

When Falling Capital Values Change Your Position

LTV covenant breach clauses are standard in UK commercial mortgage facilities.

They sit inside bilateral facility agreements (not on lender websites, not in published criteria guides), and they give lenders the right to act if the property value falls below a threshold that pushes the LTV above the agreed covenant level.

How the mechanism works: the lender tests your LTV periodically, typically annually or when a revaluation is triggered. If the test shows your loan balance exceeds the covenant LTV (say, 75%), you are in breach.

The lender will notify you and provide a cure period within which you must remedy the breach. The cure is typically paying down the loan balance, providing additional security, or both.

If you cannot cure, the breach becomes an Event of Default. At that point, the lender’s options include demanding full repayment, increasing your interest margin, or enforcing their security.

Most lenders will try to negotiate before enforcing against a commercial property, but the contractual right still exists. We flag the covenant because it is easy to overlook while values are stable and expensive to discover only after the market moves against you.

This risk is most acute for borrowers who acquired property at peak values and have seen those values correct.

The 2022–2023 commercial property repricing left some borrowers (particularly those in retail and offices) with LTV covenants that were comfortable at acquisition and stressed two years later.

We recommend checking your facility agreement if your commercial mortgage is more than two years old. Confirm whether it contains an LTV covenant, what the threshold is, and where current market values put you relative to that threshold.

Frequently Asked Questions