Commercial Investment Mortgages - Business Expert
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Commercial Investment Mortgages

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Mike Smith
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Mike Smith
Updated on 5 May 2026
Independently assessed Rates verified 5 May 2026
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A commercial investment mortgage is a loan secured against commercial property that is let to tenants — the borrower is an investor, not the occupier. The loan is underwritten on the rental income the property generates, not the borrower’s business trading performance. This is the commercial equivalent of a buy-to-let mortgage, and the underwriting logic is similar: can the rental income service the debt?

How Commercial Investment Mortgages Work

The lender advances funds against a commercial property that is tenanted or will be tenanted. The primary security is the property itself; the primary income stream assessed for affordability is the passing rent or estimated rental value (ERV).

The key metrics lenders use:

DSCR (Debt Service Coverage Ratio): rental income divided by annual debt service. Most lenders require a minimum of 1.25x — meaning the rent must cover the mortgage payment by at least 25%. Some lenders require 1.35x or above on higher-risk property types. [EDITORIAL JUDGEMENT — verify specific DSCR requirements against individual lender criteria]

LTV: commercial investment mortgages typically run at 65–70% LTV, somewhat lower than owner-occupier lending because rental income is seen as a more variable cashflow than business trading income. [VERIFY — cross-reference specialist lender criteria pages]

Tenant quality: the lender assesses who is paying the rent. A long lease to a listed company or government body is a different risk from a short lease to a small private business. Institutional tenants attract better terms. Vacant property or properties with upcoming lease expiries attract caution or significantly tighter LTV.

Lease length: lenders want comfort that the income stream is stable over the loan term. A 15-year lease with 10 years remaining provides strong coverage. A 3-year lease provides limited comfort and may require a lower LTV or personal guarantee.

What Types of Property Qualify

Standard commercial investment:
– Offices (single-tenant or multi-let)
– Industrial and warehouse units
– Retail — high street and out-of-town
– Mixed-use (commercial ground floor, residential above)

Specialist commercial investment — typically requires a specialist lender:
– Pubs and licensed premises
– Care homes and healthcare facilities
– Hotels and serviced accommodation
– Student accommodation (commercial structures)
– Petrol stations and car washes

High street banks typically cover the standard list. Specialist property types require lenders with sector experience and the ability to value and realise specialist assets.

Semi-Commercial Property

Properties with a mix of commercial and residential use — typically retail or office on the ground floor with residential flats above — occupy a middle ground. They are treated as commercial for mortgage purposes but valued on both the commercial element and the residential element separately. Specialist lenders (Shawbrook, InterBay, Together) are more comfortable with semi-commercial than high street banks. See Semi-Commercial Mortgages for a dedicated explanation.

Interest-Only vs Repayment

Commercial investment mortgages are frequently structured on an interest-only basis. The rationale: the investor’s return comes from rental income (after debt service) and capital appreciation, not from equity accumulation through capital repayment. Interest-only keeps monthly outgoings lower and maximises the running cash yield.

The risk with interest-only is that the full capital must be repaid at maturity — typically via sale or refinance. Lenders will want to understand the exit strategy at origination.

Repayment commercial mortgages are available and appropriate for investors who want to progressively build equity in the asset.

Eligibility

Commercial investment mortgages are available to:
– Limited companies (including Special Purpose Vehicles set up specifically for property investment)
– Individuals and partnerships
– LLPs
– Pension funds (SIPP and SSAS structures — specialist advice required)

Most lenders require the property to be tenanted (or immediately lettable) and the rent to pass the DSCR test at the proposed loan amount. Some lenders will consider vacant property if there is a credible tenancy pipeline, but this is specialist territory and requires a lender with specific appetite.

Rates and Costs

Commercial investment mortgage rates sit above owner-occupier rates, reflecting the additional risk of rental income variability. The margin over Base Rate will depend on LTV, property type, and tenant quality. See Commercial Mortgage Rates for a fuller discussion.

Arrangement fees (typically 1–2%) and legal and valuation costs add to the total cost. These are proportionally more significant on shorter-term deals and smaller loan sizes.

  • Commercial Mortgage Rates
  • DSCR Explained
  • Commercial Mortgage LTV Explained
  • Semi-Commercial Mortgages
  • Owner-Occupier vs Investment Commercial Mortgages
  • Commercial Mortgage Fees Explained
  • Best Commercial Mortgage Lenders UK