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Deposits Required on Commercial Mortgages
While most business owners will be familiar with residential mortgages, applying for commercial lending is somewhat different - and the deposit requirement is also variable.
What Deposit Do I Need for a Commercial Mortgage?
The level of deposit depends on what sort of mortgage you're applying for. Mortgages for businesses fall into these categories:
- Owner-occupied mortgages - if you want to buy a commercial building to work from.
- Investment mortgages - for buy to lets commercial premises.
Deposits required will vary depending on which category you fall into.
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What are the Deposit Requirements for Different Types of Commercial Mortgages?
Generally speaking, a commercial mortgage lender will look for deposits from 25% and up to 40%. This all depends on the risk level, although typically deposits are higher for business mortgages than residential.
Most mortgage lenders will offer:
- Owner-occupied mortgages up to 70-80% LTV.
- Commercial investment mortgages up to 75%.
In some cases, you can borrow more, and even up to 100% LTV, although this is a more specialist product and security will be required.
What Factors Around my Commercial Mortgage Impact the Deposit Required?
Every lender will consider the risk factor before making an offer.
Risk is assessed according to your specific circumstances, including factors such as:
- Your credit score and credit history. If you have bad credit, a higher deposit will be required. In many cases, the best option is to apply to a specialist bad credit commercial lender.
- Your experience and trading history. The longer you have been trading, the lower the risk, so having two or three years of experience is positive. There are niche lenders who specialise in start-ups and new businesses, but will usually require additional security where the deposit value isn't high.
- Your affordability assessment. Lenders will look at the business profits, tax obligations and earnings to determine whether the company is sufficiently profitable to generate the funds required to keep up to date with the mortgage repayments.
Can I Get a Commercial Mortgage with a Small Deposit?
Yes, by working with an experienced lender, you can negotiate Loan to Value caps with a lender if your deposit isn't high enough to meet their lending criteria.
In most cases, this means they will require an alternative form of security - usually another building, or a business asset with sufficient equity.
Are Commercial Mortgages Available with Zero Deposit?
100% LTV commercial mortgages do exist, but this is a specialist product, so you are strongly advised to consult a professional brokerage team.
You will need some form of security with enough equity to act in place of a deposit.
Remember that any security offered is at risk of repossession if you do not keep up to date with your repayments.
Expert Commercial Mortgage Advice
If you have a low deposit, are seeking a high LTV commercial mortgage, or want to compare the different lending rates and terms on the market, contact the Revolution Finance team today.
Our independent whole-of-market team is available on 0330 304 3040 or via email at [email protected].
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As specialist mortgage brokers for a huge variety of applicants, the whole-of-market consultants at Revolution provide access to an exceptional range of lenders, products and mortgage deals. That means you get the advantage of professional negotiation and broker-exclusives through an established lending network to ensure we always find you the most competitive mortgage available.
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.