Commercial mortgages at a glance
| Question | General position |
|---|---|
| What secures the borrowing? | Usually the commercial property |
| What can it fund? | Purchase, refinance or qualifying capital requirements |
| Is every case priced the same? | No. Terms depend on lender and transaction |
| Is a valuation normally relevant? | Commonly, yes |
| Is approval guaranteed after an agreement in principle? | No |
| Can requirements differ by property type? | Yes |
Owner-occupied and investment commercial mortgages
A useful first distinction is how the property will be used.
Owner-occupied property
The applicant's business trades from the property. A lender may therefore pay particular attention to the trading business's ability to support the borrowing.
Commercial investment property
The property is held as an investment and occupied by a tenant or tenants. Rental income, lease terms, tenant profile and property characteristics can become important parts of the assessment.
Some transactions contain elements of both and require a more detailed classification.
How a commercial mortgage application generally works
- 1Requirement
- 2initial information
- 3indicative lender fit
- 4application
- 5valuation and underwriting
- 6legal work
- 7formal offer/conditions
- 8completion
1. Define the requirement
The starting information normally includes the property, purchase price or estimated value, amount required, intended use and applicant details.
2. Review potential lender fit
Commercial lenders do not all accept the same property types or borrower profiles. An initial review can identify which lenders appear to have criteria relevant to the transaction.
This is not an approval.
3. Submit an application
The lender will request supporting information. The precise list varies by case.
4. Valuation and due diligence
Where required, the lender may instruct an independent valuation and undertake legal, financial and property due diligence.
5. Underwriting and offer
The lender assesses the complete case against its policy. Further questions or conditions may arise before an offer is issued.
6. Legal completion
Solicitors complete the necessary security and transaction documentation. Only after all conditions are satisfied can the transaction complete.
What information can lenders consider?
Typical information may include:
- Property address and type
- Purchase price or current estimated value
- Amount required
- Deposit or equity
- Business accounts and management information
- Bank statements
- Existing borrowing
- Applicant background
- Rental schedule or lease information for investment cases
- Property valuation
- Purpose of funds
- Experience relevant to the transaction
The exact requirements depend on the lender and case.
How the security works
A commercial mortgage is normally secured on the property. Security gives the lender legal rights over the asset if the borrower does not meet its obligations.
Additional security or guarantees can sometimes be requested depending on the structure. It should never be assumed that the property alone will satisfy every lender.
What determines the terms available?
It is tempting to focus on a headline interest rate, but commercial mortgage terms can be influenced by multiple factors.
| Factor | Why it can matter |
|---|---|
| Property type | Some properties are more specialised or harder to sell |
| Loan relative to property value | Affects the lender's security position |
| Trading performance | Relevant where repayments rely on the operating business |
| Rental income | Important for investment property |
| Lease strength | Can affect investment-property assessment |
| Borrower experience | May be relevant for some transactions |
| Credit profile | Can affect lender appetite |
| Loan size and term | Lenders have different minimums, maximums and policies |
Bridge does not publish generic “available from” rates because a headline figure without the underlying case assumptions can be misleading.
Commercial mortgage example
A manufacturing company currently rents its unit and is considering buying a larger freehold property.
The transaction may involve questions such as:
- How much equity or deposit is available?
- What are the company's recent trading results?
- Will the business occupy the whole property?
- Is any part sublet?
- Does the property have specialist characteristics?
- How much borrowing is required?
Those facts help define the transaction. They do not determine approval on their own.
Commercial mortgage or another form of finance?
A commercial mortgage is generally associated with longer-term property funding. If the requirement is short-term — for example because a property needs work before it can meet the intended long-term lender's requirements — bridging finance may be another category encountered.
If the requirement is not primarily property-related, see our overview of commercial finance options or our guide comparing a commercial mortgage with a business loan.
Key takeaways
- Commercial mortgages are generally secured on commercial property.
- Owner-occupied and investment cases are assessed differently.
- A lender may review both the property and the applicant's financial position.
- Valuation, underwriting and legal work commonly form part of the process.
- Indicative discussions are not the same as a formal lending offer.
To organise the information behind a possible commercial-property requirement, use the funding readiness assessment.