What is a commercial mortgage?

Commercial mortgages are loans which are secured against a non-residential property. They are used to buy or re-mortgage business premises, such as offices, warehouses, hotels or shops, although they can also be used on part commercial, part residential ‘mixed use’ properties or to develop new or existing premises for residential letting. There are two distinct types of commercial mortgage available on the market place; one which allows for trading or expansion purposes (owner-occupied) and another which caters to investors who wish to rent their property (commercial buy to let).

Residential buy to let mortgages also exist. Different rates and finance rules will apply to whichever of these options are chosen, but as a rule of thumb most lenders will set a minimum borrowing limit of £75,000. This is because of the various legal and administrative costs that are incurred in taking security on a commercial property (although business loans of up to £25,000 are usually unsecured). Commercial mortgages typically run from 3 to 25 years in length.