Owner-Occupied Commercial Mortgages

An owner-occupied commercial mortgage is a type of loan used to purchase or refinance a commercial property that will serve as the applicant's business premises. These mortgages can be applied for either in the name of the company or by the business owner personally.

If the commercial property is being purchased to lease out to a third party, a commercial investment mortgage would typically be more suitable.

How Do They Work?

Owner-occupied commercial mortgages can be arranged on either a capital repayment or interest-only basis. They are secured with a first legal charge over the property, and in some cases, the loan can be secured against multiple properties.

Repayments are usually made monthly, similar to a residential mortgage, though other payment structures, such as quarterly or seasonal payments, may also be possible.

Factors Influencing the Maximum Loan for an Owner-Occupied Commercial Mortgage

In addition to the loan-to-value ratio, lenders will also assess your ability to repay the debt. When evaluating owner-occupied commercial mortgages, your financial accounts will provide the necessary information to determine the maximum loan amount.

Each lender has its own affordability criteria, meaning what one lender considers affordable may differ from another. Typically, commercial mortgage lenders calculate affordability based on the adjusted net profit, also known as EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation).

EBITDA is derived by adding back interest, tax, depreciation, and amortisation to the net profit. Once this figure is calculated, lenders will expect it to be a certain percentage above your annual mortgage repayments, using either the actual interest rate or a 'stressed interest rate'.

This percentage typically ranges between 125% and 250%, and if a stressed interest rate is applied, it is usually 3% to 6% higher than the rate you’ll be charged.

How Long Does the Application Take?

Owner-occupied commercial mortgage applications generally take between 6 to 12 weeks to complete, depending on the complexity of the application.

Who Can Apply for an Owner-Occupied Commercial Mortgage?

We offer lending to the following applicants:

• Individuals
• Non-UK residents
• Partnerships
• Pension funds
• Limited companies
• Offshore companies