Commercial Mortgage FAQ
General information only. This is not financial advice.
Last reviewed: 2026-06-06
What is a commercial mortgage?
A commercial mortgage is a loan secured against a non-residential property — such as an office, retail unit, warehouse, industrial building, or mixed-use premises — or against a residential property owned through a company for investment purposes. Commercial mortgages fall into two main categories: owner-occupied (where the borrowing business operates from the property) and commercial investment (where the property is let to a third-party business tenant). Commercial mortgages are not regulated by the FCA in the same way as residential mortgages, which means the consumer protections that apply to homeowners — such as regulated advice and the Mortgage Credit Directive — do not automatically extend to commercial lending. The terms, rates, and underwriting criteria differ significantly from residential mortgages.
How does a commercial mortgage differ from a residential mortgage?
The key differences are: (1) Assessment basis — commercial mortgage underwriting focuses heavily on the income generated by the property (rental yield or business trading income) and the quality of the business covenant, whereas residential mortgages focus on personal income and affordability. (2) LTV — commercial mortgages typically lend 65–75% LTV, compared to up to 95% LTV on residential. (3) Rates — commercial rates are typically higher than residential rates and are often quoted as a margin above SONIA or Bank of England base rate. (4) Terms — commercial mortgage terms are usually 5–25 years, often with shorter fixed periods. (5) Regulation — commercial mortgages are not FCA-regulated (unless the property has a significant residential element), so borrowers have fewer automatic protections. Professional advice from a commercial finance broker is strongly recommended.
Can I get a commercial mortgage as a sole trader or limited company director?
Yes. Both sole traders and limited company directors regularly access commercial mortgage finance. For an owner-occupied commercial mortgage, lenders assess the trading performance of the business occupying the property — typically 2–3 years of accounts, bank statements, and business plans are required. For a limited company, the lender will also consider the company's credit profile and may require personal guarantees from directors. As a sole trader, the business and personal finances are treated as one, so your personal income, credit history, and self-assessment tax returns will all be reviewed. Income complexity — variable earnings, seasonal fluctuations, retained profits — is common in commercial borrowers, and specialist lenders who understand business income structures are often better placed than high-street banks to underwrite these applications.
What LTV is available on commercial mortgages?
Most mainstream commercial mortgage lenders offer 65–70% LTV on standard commercial properties. Some specialist lenders will stretch to 75% LTV for strong covenants or owner-occupied properties where the business has a long trading history. LTV is lower than residential because commercial properties are considered higher-risk security: they are harder to sell quickly, values fluctuate with the business market, and vacant commercial properties generate no income. Properties with sitting tenants on long leases from creditworthy businesses (such as national retailers) may attract better LTV terms than vacant units or short-term tenancies. Mixed-use properties — part commercial, part residential — may be assessed differently depending on the proportion of each use; some lenders split the valuation and apply different LTV caps to each component.
Do I need a personal guarantee for a commercial mortgage?
In most cases, yes. Where a limited company is the borrower, commercial lenders almost universally require personal guarantees from the directors and/or shareholders. A personal guarantee means that if the company defaults and the sale of the secured property does not cover the outstanding debt, the lender can pursue the guarantor personally for the shortfall. This effectively makes the directors personally liable for the company's mortgage debt, removing the limited liability protection that a company structure normally provides. The extent of the guarantee can sometimes be negotiated — for example, capped at a specific amount or limited to a specific percentage — but unlimited personal guarantees are common on commercial mortgage applications, particularly for SME borrowers. Legal advice is strongly recommended before signing a personal guarantee.
What is a mixed-use mortgage and how is it assessed?
A mixed-use property combines residential and commercial elements in the same building — for example, a shop on the ground floor with a flat above, or a business premises with an owner-occupied dwelling attached. Mixed-use mortgages sit between residential and commercial lending and are assessed differently depending on the proportion of each use and the lender. If the residential element is more than 40% of the total floor area (and the borrower occupies it), some lenders will treat it as a regulated residential mortgage with commercial elements. If the commercial element dominates, it is underwritten as commercial finance. Lenders who specialise in mixed-use properties include some challenger banks and specialist commercial lenders — high-street banks often struggle with mixed-use assets and may decline even when the underlying proposition is sound. A broker with commercial experience is essential.
Risk warning
Your property may be repossessed if you do not keep up repayments on your mortgage. Commercial mortgages are not regulated by the FCA — seek independent legal and financial advice before committing, particularly before signing a personal guarantee.
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