What is an owner-occupied commercial mortgage?

A little over half of ‌commercial properties in the UK are rented rather than owner-occupied. This represents nearly a 20% increase on the 36% of residential properties which are rented. 

But if you’d prefer to be an owner than a renter, then read on. 

If you’re considering purchasing a commercial property, you might be thinking about how you’re going to fund it. One popular solution is an owner-occupied commercial mortgage. 

Unlike buy-to-let mortgages, owner-occupied commercial mortgages are designed for businesses that intend to operate from the premises they’re purchasing. This type of mortgage can enable you to take control of your workspace while gaining equity in a property, which can later be sold to unlock working capital, to purchase a new property, or to fund retirement. 

If you’re ready to find an owner-occupied commercial mortgage, submit your details here and we’ll be in touch to let you know if you’re eligible for funding. 

If you still have questions, here are some details about this type of funding. 

What is an owner-occupied commercial mortgage? 

Do you operate a shop, beauty salon, warehouse, law practice, or office premises? These are just a few of the instances in which an owner occupied commercial mortgage could be helpful. 

An owner-occupied commercial mortgage is a type of secured business loan where the property serves as collateral for the loan. It's a type of business loan in which a lender extends a large amount of funding to a borrower to purchase a commercial property in which the business is the occupant. This is different from, say, a buy-to-let mortgage, where the tenants are the occupants. This also differs from something like a semi-residential mortgage, which is where the property doubles up as both a commercial premises and a residential property. 

How an owner-occupied commercial mortgage generally works is that you receive a large sum of money, up to around 75% of the value of the property, to purchase a property that the business will occupy. An example of this would be a storefront used as a nail salon where the salon is the owner of the physical store. The loan repayments are then usually spread across 3 to 30 years, with interest and fees charged in addition. 

How can I get an owner-occupied commercial mortgage?

To get an owner occupied commercial mortgage, you first need to find a lender who offers this service and is happy to approve you for this form of business finance. There are two popular ways to go about doing this. 

First, you could conduct the search yourself. Common ways to do this might include using search engines, asking your current lender or finance provider, or heading into a local brick-and-mortar bank. If they offer this service and if they can accommodate you, they may run a hard credit check to determine your creditworthiness. This could have an impact on your credit score. 

Some lenders do run soft checks instead to let you know if you’re eligible before doing a full check. If this is something you’d like, just ask the lender if they can do this for you. 

Another way to find an appropriate lender and submit an application is through a business broker, like Funding Options by Tide. We work with over 120 lenders who offer between £1,000 and £20 million in funding. While a full application would have an impact on your credit score, we can let you know if you’re eligible first without impacting your score. Our deep network of lenders enables us to effectively search for the most appropriate funding source for our eligible applicants. 

Once you’ve found a suitable lender, you can submit an application directly with them. This will usually involve gathering and submitting important documentation, such as information about the property you want to purchase, details on your business, business accounts, and bank statements. Bear in mind that providing a larger deposit, having a better credit score, and demonstrating strong business income can help you secure a more competitive interest rate. You can access your business credit score and understand the factors influencing it with Tide’s Credit Score Insights. 

Benefits of an owner-occupied commercial mortgage 

There are many reasons borrowers choose to leverage owner-occupied commercial mortgages, including some of the following. 

Control

As the owner of a property, you have much more control over how the property is used. You’re more able to modify it and a landlord can’t ask you to leave once the tenancy is up. 

Equity 

Properties sometimes go up in value. While renting, this can result in higher rental costs, however, when you own the property, this can increase your equity value. 

Interest rates 

Interest rates for a mortgage like this can be more favourable than interest rates for funding like limited company buy-to-let mortgages. 

Some drawbacks and risks of owner occupied commercial mortgages 

There are several factors that can prevent borrowers from choosing owner occupied commercial mortgages, including some of the below. 

Deposit 

Funding like this often requires a deposit. Many lenders require a 25% deposit. If the property you’re considering costs around £500,000, you’d have to pay £125,000 upfront. 

Maintenance costs 

When renting a property, the landlord is often responsible for maintenance and repair costs, as well as building insurance costs. As the owner, you take on that responsibility. 

Financial strain 

Regular mortgage payments can become a financial strain if business profits decrease. This strain can impact cash flow, limit your ability to invest in growth, and lead to missed payments. If you default on the loan, you risk having the property repossessed. 

Find an owner-occupied commercial mortgage with Funding Options by Tide

We’re Funding Options by Tide. We work with over 120 lenders helping facilitate owner-occupied commercial mortgages, semi-residential mortgages, buy-to-let mortgages, and a range of other business finance types. 

Whether you’re looking for a bridging loan, auction finance, or another type of property financing, just submit your details via the link below to find out if you’re eligible for up to £20 million in financing. 

Find an owner-occupied commercial mortgage.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.