Buying your own premises: how owner-occupier commercial mortgages are assessed

When a business buys the premises it trades from, the mortgage is assessed differently from an investment purchase. There is no tenant paying rent — the business is the occupier — so the lender is backing the business's ability to pay as much as the value of the building.

The business comes first

Lenders want to see that the business can comfortably afford the repayments out of its profits. Two or three years of accounts is the usual starting point, along with recent management figures and bank statements. A business that has been trading profitably for several years, in a sector the lender understands, is the strongest case.

Newer businesses can still borrow, but expect a lower loan-to-value, a closer look at the directors' experience, and possibly personal guarantees.

The property still matters

The building is the lender's security, so its value and saleability count. A general-purpose unit — an office, a light-industrial unit, a retail shop in a good location — is easier to lend against than a specialist building that only suits one type of business. Lenders typically advance up to around 70–75% of the value, so a deposit of at least a quarter is a sensible planning assumption.

Fixed or variable

Owner-occupier mortgages can be fixed for a period or track a base rate. Fixing gives certainty over the repayments, which many trading businesses value; a variable rate can offer more flexibility on early repayment. Terms often run for fifteen to twenty-five years, on a capital-and-interest basis.

Why owning can make sense

Paying a mortgage rather than rent builds equity in an asset the business controls. Some business owners hold the property personally or through a pension scheme and lease it back to the business — a structure worth discussing with your accountant before you apply.

Getting ready

Have your accounts, a summary of the purchase, and an idea of the deposit you can put in. If you were quoted a while ago and put the idea on hold, it is worth asking again: lenders' appetite for well-run trading businesses changes over time.