How much deposit do you need for a commercial mortgage?

Commercial mortgages usually need a larger deposit than a residential mortgage. How much you need depends on the property, the lender and your own position, so there is no single answer. This guide explains what drives the figure.

The usual range

Most commercial mortgage lenders will lend up to around 65% to 75% of the property's value, which means a deposit of roughly 25% to 35%. Some lenders will go higher or lower for particular cases. The exact figure is set by the lender, and it can change with the property type, your finances and the market.

What affects the deposit

• Type of property. Standard offices, shops and industrial units are usually easier to lend on than specialist properties such as pubs, hotels, care homes or buildings in poor condition.
• Owner-occupier or investor. If your own business will occupy the building, lenders look at the business accounts. If you are buying to let it to others, they look at the rent, the tenant and the lease.
• The strength of the business or the tenant. An established business with good accounts, or a strong tenant on a long lease, can give a lender more comfort.
• Your experience and other borrowing. Lenders consider what else you own and owe.
• Valuation. A lender lends against its own valuation, not the price you agree. If the valuation is lower, you may need a larger deposit.

Where the deposit can come from

Deposits often come from business or personal savings, from the sale of another property, or from borrowing secured on another property you own. Lenders will want to know the source, and they may have rules about borrowed deposits, so tell your adviser early.

Costs on top of the deposit

• Legal fees and a valuation
• Any arrangement or lender fee
• Tax on the purchase, which depends on the price and the rules at the time
• Surveys or reports the lender requires

Other things lenders ask about

Expect to provide recent accounts, business bank statements, details of any existing borrowing and information about the property. Lenders may also ask about how you will repay the loan from the business's earnings or the rent.

Find out more

Read more about commercial mortgages, or look at your area on our areas we cover page. We have local pages for places including Chelmsford and Basildon.

Talk it through

If you would like to talk through a purchase, get in touch and we will explain what may be possible for your case.