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Affordability Criteria in Commercial Mortgages

How do affordability assessments work when you're applying for a commercial mortgage on behalf of a business? And what do you need to know about how to get a commercial mortgage loan? Read on to discover how lenders evaluate commercial mortgage risk.

Commercial Mortgage Affordability Requirements

Businesses looking into how to get a commercial mortgage loan always need to know two things:

  • How much they can borrow
  • What is it going to cost

These questions about getting a commercial mortgage both depend on the affordability assessment carried out by a specialized commercial mortgage lender. Commercial mortgages are often used by business owners to buy larger premises to enable them to expand faster. By buying their own premises, they can avoid rising rents and high fees.

We have created this guide to explain how affordability is calculated - but for further support, please contact the mortgage brokers team on 0330 304 3040 or email us at [email protected].

How to Get a Commercial Mortgage Loan for the Maximum Value?

Very often, businesses find themselves frustrated since online calculators cannot show exactly how much they can borrow. While they might help resolve the question of how to get a commercial mortgage loan, the answers are generic and don't contain the relevant commercial mortgages criteria.

This happens because commercial lending is determined on every individual case, and there isn't a generic calculation you can use to work out how big of a cash flow you can get for the required amount.

Commercial Mortgage Calculator

Property or loan details



Error: Property must be valued at £50,000 or more.

Error: Estimated rental income must be between £1 and £99,999.

Based on your details, you can borrow up to: £0

This calculator is an estimation of how much you could borrow. If you’re ready to take out a mortgage, speak to a Revolution brokers to see what options are available.

Commercial Mortgage Affordability: How to Get a Commercial Mortgage Loan

To work out what they can offer to lend, a commercial mortgage provider will need to analyze your finances and trading history. 

This can include looking at earnings before interest, tax, depreciation, and amortization (EBITDA) to see what sort of profits are being generated and whether this is sufficient to keep up with the mortgage repayments.

In some cases, a specialist lender will also include other income streams in this calculation.

How is Affordability Calculated?

How do I get a commercial mortgage on an affordability basis? Commercial investment mortgages differ from owner-occupier lending since the lender will need to know the projected rental income to assess the viability of the investment.

The amount of rental income you will need to establish in comparison to the mortgage costs varies between lenders:

  • Some will need to see rent as high as 190% of the mortgage payments.
  • Others will need a minimum rental cover of 130% on a buy-to-let investment.
  • Specialist providers will need around 110% to 125% coverage from rental income.
  • In cases like residential mortgages or commercial mortgages are limited to up to 65% of the property value.

What Deposit is Required for a UK Commercial Mortgage?

It is always vital to work out how much you need, and what sort of deposit you have available before looking into getting a commercial mortgage.

Most lenders will look for a deposit starting at 25%, and sometimes up to 40%, so this makes a big difference to how much you can borrow. The highest LTV ratio available is usually 75%.

There are specialist lenders who will offer as high as 100% LTVs on commercial mortgages, but they will need some alternative security instead of a deposit.

The higher the deposit, the lower risk of the commercial mortgage application and the more you may be able to borrow.

What are the Costs of a Commercial Mortgage?

If you're concerned about how to get a commercial mortgage loan, the interest rate isn't the only cost to be aware of, and you need to understand precisely what is involved to budget correctly.

Costs and charges include:

  • Brokerage fees - Usually around 1% of the mortgage value, but often results in a cheaper mortgage due to having expert advice on the most cost-effective lenders to apply to.
  • Legal costs - with around £500 being the average.
  • Lender arrangement fees - usually around 1% or 2% of the mortgage value, on commercial lending up to £1 million.
  • Survey and valuation costs.

How Do I Get a Commercial Mortgage with Bad Credit?

Many borrowers worry about getting a mortgage with adverse credit, and it will impact which lenders you should apply to, and what sort of interest rates you're likely to be offered.

Bad credit commercial lenders specialize in this situation and will consider when the credit issues occurred, and the severity of the circumstances.

How to get a commercial mortgage loan with poor credit may depend on multiple factors, and Revolution can advise on ways to mitigate the risk while improving your chances of a successful application and negotiation of competitive rates.

Does the Length of my Commercial Mortgage Change the Affordability Assessment?

Unlike residential mortgages, a commercial mortgage can be as short as three years, or as long as 40 years so discovering how to get a commercial mortgage isn't so much about static repayments.

Overall, the longer the term, the higher the costs usually are, since you are paying smaller monthly amounts but over a more extended period, unlike residential mortgages where some other security options may be required.

What Other Factors do Lenders Consider in the Affordability Process?

Every mortgage lender has its internal lending policies, and they will consider several factors in determining your affordability rating. The most important are your business profits, having a good credit history, and what deposit you can offer, but they will also look at:

  • How much trading experience do you have, and what sector you are working in.
  • Where the commercial property is based.
  • What sort of premise do you want to mortgage, with particular types of investment properties (like farming land) requiring specialist lending.

Professional Support with Commercial Mortgage Affordability

For more advice on commercial mortgage applications, and how to ensure your application is successful, contact the Revolution Brokers team on 0330 304 3040 or via email at [email protected].

We can work with you, whether you're concerned about how do I get a commercial mortgage with adverse credit, or how to get a commercial mortgage loan with minimal trading history.

As commercial lending experts, we can recommend the best lenders for your circumstances, as well as helping you demonstrate affordability.

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