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Care Home Commercial Mortgages
The care sector continues to grow, and care homes are a common enquiry where businesses are looking to invest in a company purchase, or renovate an existing healthcare facility.
Fortunately, there are multiple options for commercial financing within this sector, and we have detailed some of the essential information here.
What is the Best Way to get a Commercial Care Home Mortgage?
As the population ages and the social care sector expands, the number of lenders offering specific mortgages for care homes continues to grow.
One of the biggest positives is being able to demonstrate two or three years of experience, which shows a positive track record.
Where an investor wishes to purchase a care home, but won't be involved in the day to day running, lenders will usually request a breakdown of the qualifications and experiences of the management team, with accreditation or certification such as an NVQ 4 being a minimum.
The other crucial factors in care home mortgaging include:
- Care Quality Commission reports reflecting the rating of the business, where an existing care home facility is being purchased.
- Information about occupancy rates and ongoing profitability.
Similarly to many other sectors, having experience is an essential requirement, which demonstrates that you know what you are doing, and are likely to run a profitable business which will be able to keep up with mortgage payments.
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How Many Years of Experience are Needed to Get a Mortgage for a Care Home?
The industry standard is to look for two or three year’s worth of trading. However, you can apply to specialist lenders if you are new to the sector, provided you can meet other criteria.
If you are buying or investing in a care home that has made losses in the past, the reason for the mortgage will also matter. For example, if you are buying out a business and replacing the management, or remortgaging to invest in refurbishments, this may be looked on more favourably.
A business plan is also vital as you can explain your plans for the future.
What Deposit do I Need to Mortgage a Care Home?
As with most commercial mortgage types, lenders will usually look for a deposit of around 20% to 40%, depending on the other circumstances.
This all depends on your forecasts, business performance and credit rating.
Is it Possible to Apply for a Commercial Care Home Mortgage with Bad Credit?
Many mainstream lenders refuse applicants with adverse credit, although more niche providers will want to know a little context and when the bad credit issues occurred.
You may find that a high-street bank will automatically refuse any care home mortgage with credit concerns, but that bad credit commercial lenders take a more flexible approach to the assessment process.
Can I Buy a Care Home Through Bridging Finance?
As an alternative to a mortgage - or a stopgap if an immediate purchase is necessary - you can invest in a business via a bridging loan. These typically run for one to three years and are ideal for an expedited investment such as purchasing a care home at auction.
The critical factor in bridging finance is to demonstrate your exit strategy and how you will repay the loan.
This is usually via a remortgage, or by selling the business.
Can Care Home Investors Purchase a Property with Development Finance?
There are some scenarios where development finance is the best option. For example:
- Starting a new care facility from scratch.
- Building your own care home premises.
- Renovating an out-dated care home facility.
Development financing works like a bridging loan, but with funding released in stages according to the progress of the build or development work.
The benefit here is that you only pay interest on what you have drawn down, and not on the total value of the development finance facility.
Using a Commercial Mortgage Broker for Care Home Purchases
There are multiple financing options to buy a care home, and the right choice depends on what you want to borrow, for how long, for what sort of business, and how closely you meet the lender's eligibility criteria.
A whole-of-market independent broker is the best person to consult, with the leverage to negotiate rates, offer products from across the range of lenders, and provide tailored advice to support your financing needs.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.