Commercial Mortgage Rates Compared

How to compare commercial mortgage rates with Brickflow

Using Brickflow’s commercial mortgage comparison tool is ultra-easy and ultra-fast, and gives you instant access to live loan options from across the market.

What’s more, when you have found the best loan for your commercial property, you can lock in your rates by requesting a DIP (Decision in Principle) with your advisor. You’ll then receive an offer (or multiple offers) back within the hour.

Here’s how to use our live market comparison tool:

1. ENTER your project criteria and model your deals

• It takes seconds to enter your property details and search commercial mortgages from banks, non-banks and specialist lenders
• Instantly see how much you can borrow and how much it will cost

2. COMPARE loans from 100+ specialist lenders

• Compare commercial mortgage rates, fees, LTVs, deposit requirements and more
• Filter and sort your results
• Save your search and log back in later

3. APPLY directly from the platform with your intermediary or a Brickflow partner

• Secure a same-day Decision in Principle (our record is 7 minutes!)
• Apply using our digital Smart Appraisal™, the only tool on the market that connects directly with lenders
• Lenders love Brickflow’s digital application because it covers everything they need to know - but if one lender says no, apply to another with just one click, meaning no more repetitive form-filling

Your intermediary will manage your application and ensure you’re happy with the loan terms.

What is a commercial mortgage, and how does it work?

A commercial mortgage is a long-term borrowing arrangement, used to purchase or refinance commercial property. 

Like a homeowner mortgage, they are repaid monthly over a set term – typically 15 - 25 years –  but some commercial mortgage lenders will stretch to 30 years. The monthly payments are either capital + interest or interest only, in which case the borrower will still owe the full loan amount at the end of the term. 

The monthly payments are determined by:

• The size of the loan
• The size of your deposit
• The interest rate
• Whether it’s capital + interest or interest-only payments (commercial mortgage rates can be fixed or variable).

There are two types of commercial mortgages:

• Commercial investment mortgages: These are mortgages for commercial properties that will be let to generate income. Lenders consider the known or projected rental income to assess affordability/serviceability
  
  
• Owner-occupied commercial mortgages: Where the commercial property will be used by the borrower as their own business premises. The loan serviceability is tested against the strength of the business

Lenders will consider the Debt Coverage Ratio of the loan - a metric used to ensure that the property income, or business trading accounts, can service the monthly payments, with a sufficient buffer. Most lenders prefer a monthly income of around 1.25x the expected monthly payments.

To find out more about commercial mortgages, click through to our dedicated page.

What can a commercial mortgage be used for?

Commercial mortgages can be used for a range of commercial property transactions, typically involving:

• Buying a commercial property
  • As an investment, to rent to a third party (or parties) and generate a profitable rental income
  • To acquire a premises for your own business operations
• Refinancing a commercial property
  • Releasing equity to finance essential business equipment or upgrades
  • To expand or refurbish the property
  • To invest elsewhere

Examples of commercial property include:

• Care Home
• Education
• Heavy Industrial
• Hotel 
• Leisure
• Licensed HMO
• Light Industrial
• Medical
• Mixed Use (part residential part commercial)
• Mixed Use (All commercial)
• Multi-Unit freehold block
• Office
• Retail 
• Retirement
• Student

What to consider when comparing commercial mortgages

When comparing commercial mortgages, consider what is most important for your circumstances and current financial situation, and what you hope to achieve from the investment. 

For example, lower equity contribution or lower monthly payments; higher arrangement fees or lower total loan costs?

Use Brickflow’s live-market commercial mortgage calculator to see how much you could borrow and directly compare loan rates, monthly payments, arrangement fees and total costs from banks, non-banks and specialist lenders.

If we look at different loan examples for the same property, we can see that the best rate doesn’t necessarily mean the best loan for your needs.  

The commercial property:

• £1m purchase
• £9,000 monthly rental
• 20 year term
• Capital + interest
• 2 year fixed rate

Some things to consider when comparing these commercial mortgage examples:

• Arrangement fees: These can be added to the loan or paid upfront. Not all commercial mortgage lenders will allow you to pay arrangement fees upfront though, so consider what you are able to pay.
  
  The first loan is offered with a 5% arrangement fee of £32,500, but the lowest rate; the second example has a higher rate but just £13,000 in arrangement fees.
  
  
• Loan to value (LTV): How much equity do you want to contribute? In the third example, the lender is offering 75% LTV, reducing deposit requirements by £100,000. Can you  invest this elsewhere?
  
  
• Monthly repayments: Do you have the income you expect after making the monthly repayments? For owner-occupied properties, can you comfortably afford these monthly payments and how do they compare to what you currently pay (either in rent or finance)?

Other things to consider:

• Fixed rate or variable: Fixed rates are available for 2, 5 or 10 years and give you payment security. However, if you fix for 10 years, for example, mortgage rates could be lower. With variable rates, can you afford any increases in repayments if the rates change?
  
  
• Loan term: A shorter term means you will be mortgage-free sooner, increasing your monthly income, but a longer term (up to 30 years) means your monthly payments will be lower. 

Run your numbers though Brickflow’s commercial mortgage comparison tool to instantly see how viable your project is. When you know actual borrowing costs, you can accurately calculate if your investment will deliver the rental yield you expect and if the property is correctly priced.

Choosing the best commercial mortgage deal for your needs

To choose the best commercial mortgage deal for your needs, you need to compare actual rates and costs from lenders across the entire market.

But in an opaque market, that can be difficult. If your property isn’t a straightforward case, like a single HMO (House of Multiple Occupancy) or MUFB (Multi-unit Freehold Block), you will likely require a loan tailored to fit. That means repetitively inquiring with multiple lenders to find the right deal.

Unless you’re using Brickflow’s live market comparison. It gives you instant access to the best commercial mortgage rates and deals, enabling you to make an informed decision. 

Unlike other commercial mortgage rates comparison tools, where you guess rates and get a vague idea of monthly repayments, Brickflow enables you to compare actual borrowing options, with details on: 

• Interest rates
• Deposit requirements
• Arrangement fees
• Maximum LTV ratios
• Monthly costs
• Eligibility criteria

With commercial property, if you don’t get your finance right, you’ll struggle to make your deal stack up, which is why shopping around the commercial mortgage market is key to a successful investment.

Pros and cons of a commercial mortgage

Commercial mortgages, as with other finance solutions, can have both advantages and disadvantages, and it’s helpful to know both sides.

The pros of commercial mortgages

• Long-term lending: Repaying over a longer period (up to 30 years) is cheaper than using short-term funding such as a commercial bridging loan and spreads the costs into affordable repayments

• Fixed interest rates: For up to 10 years, meaning you know your exact mortgage costs every month

• More flexible borrowing: With the rise of challenger banks, there are more commercial mortgage lenders operating in the space, meaning lending has become more flexible. Interest-only and higher leverage as standard are recent evolutions to commercial mortgages.

• Higher rental yields: A commercial property investment can produce better rental yields than a residential investment.

• Better for business: Commercial mortgage repayments can be less than or similar to monthly rental commitments, but your money is invested into a property, with potential for capital gains. Buying your own premises over renting also offers more stability and means you’re not subject to landlord decisions. 

• Tax benefits: Interest paid on commercial mortgages is tax deductible, which can help reduce your business's annual tax overheads.

The cons of commercial mortgages

• Higher risk investment: Commercial property is widely perceived as higher risk than residential. It is more likely to be vacant for longer periods of time and securing a tenant can be more difficult than residential letting.

• Higher monthly payments: The mortgage still has to be paid during periods without tenants. Even with the best commercial mortgage rates, UK commercial properties typically cost more than residential properties.

• The market: The pandemic changed the commercial property landscape, decreasing occupancy rates and making capital gains less certain. A bad finance deal can easily make your commercial investment unviable.

Alternatives to commercial mortgages?

Depending on how you intend to use the commercial mortgage, there may be alternative financing options. 

Commercial mortgages are intended for long-term investment in properties that can be inhabited or need just light refurbishment work.

Alternatives to a commercial mortgage include:

• Development finance: If you are looking to purchase and carry out extensive renovations or development work, development finance would likely be better suited to your needs. It is a tailored loan drawn down in stages to specifically meet your build schedule. Development finance lenders are experts in arranging this type of funding and working with a wide range of property developers and projects. It is short-term, typically available for 1 - 4 years.
  
  
• Bridging finance: A short-term bridging loan can offer a quick solution. Depending on the plans for the property, bridging alternatives to commercial mortgages include: 
  
  • Refurbishment finance: Depending on the scale of the works and the completion timeframe, refurbishment finance could cover a quicker turnaround renovation project.
    
    
  • Auction finance: Can facilitate buying at auction, where the auction house requires a quick 28-day timeframe for completing the purchase. Find out more about auction finance.
    
    
  • Purchase/refinance bridging: You can use a bridging loan to release equity from your commercial property for a short period of time, rather than completely refinancing with another commercial mortgage.

You can instantly compare development finance rates and compare bridging loans on Brickflow too.

Use Brickflow's comparison tool to find the best commercial mortgage rates

To find the best commercial mortgage rates from across the UK market, use Brickflow’s live comparison tool.

It takes seconds to enter your property details and access real-time borrowing options from a wide range of lenders, including banks and specialist commercial mortgage lenders.

Based on your criteria, our platform will enable you to compare rates, fees, maximum LTVs and monthly costs on all products available for your circumstances.

Our software is opening up the market to everyone, so you can be sure that you’ve done a market-wide search and found the best commercial mortgage rates available.