The first question a lender will ask is: who will be occupying the building?
When diving into the commercial property market, the very first question a lender will ask is: Who will be occupying the building? The answer splits commercial mortgages into two distinct categories, each with its own underwriting rules, interest rates, and loan-to-value (LTV) limits.
The Owner-Occupier Commercial Mortgage
If your trading business is purchasing a property to operate out of — such as a manufacturer buying a warehouse, or a dental practice buying a clinic — you need an owner-occupier mortgage. Lenders view these favourably because the success of the business directly supports the mortgage payments.
Because the risk is generally perceived as lower, lenders often offer higher LTVs, sometimes up to 75% or even 80% for strong, established businesses.
The Commercial Investment Mortgage
If you are buying a commercial property strictly to lease it out to third-party businesses and collect rent, you need a commercial investment mortgage. Here, the lender is not looking at your personal business income; they are scrutinising the tenant.
They will evaluate the “covenant strength” (the financial stability of the tenant) and the length of the commercial lease. Because you rely on a third party for income, LTVs are typically capped lower, usually around 65% to 75%.
Getting Started
Understanding which category you fall into is step one. From there, a specialist broker can match your profile with the lenders offering the sharpest rates for your specific commercial strategy.