Interest-Only Commercial Mortgage

Secure an Interest-Only Commercial Mortgage Using Brickflow

• Instantly search live commercial mortgage loans from lenders across the UK
• Compare lenders' rates, fees and maximum LTVs
• Borrow between £25,000 - £60 million
• Check your deal stacks against actual borrowing costs
• Avoid wasting time chasing the wrong loan with our eligibility criteria filters
• Ultra-fast search process speeds up completion times

What is an interest-only commercial mortgage in the UK?

An interest-only commercial mortgage is a type of loan used to finance commercial property, where the borrower only pays the interest each month, rather than repaying the capital (loan amount) during the mortgage term. At the end of the agreed term, the full loan amount is repaid in one lump sum, either through refinancing, selling the property, or switching to a repayment plan.

This differs from a standard repayment commercial mortgage, where monthly payments include both the interest and a portion of the capital, gradually reducing the loan balance over time.

Interest-only commercial mortgages are particularly common in sectors such as:

• Commercial property investment
• Buy-to-let portfolios
• Owner-occupied business premises

They can be a useful option for businesses or investors looking to maximise cash flow during the loan term.

This guide explains how interest-only commercial mortgages work, when they’re suitable, and how you can find the best deal.

As always, you can use the Brickflow commercial mortgage calculator to find out how much you can borrow, and speak to a broker so you can get the best deal. 

How does an interest-only commercial mortgage work?

An interest-only commercial mortgage is a type of loan used to finance commercial property, where the borrower only pays the interest each month, rather than repaying the capital (loan amount) during the mortgage term. At the end of the agreed term, the full loan amount is repaid in one lump sum, either through refinancing, selling the property, or switching to a repayment plan.

This differs from a standard repayment commercial mortgage, where monthly payments include both the interest and a portion of the capital, gradually reducing the loan balance over time.

A property investor takes out a 5-year interest-only commercial mortgage of £1 million to purchase an office building.

• Interest rate: 6% per annum
• Monthly interest payment: £5,000
• Monthly capital repayment: £0 (interest-only)

Throughout the 5-year term, the borrower pays £5,000 per month, covering interest only. The original £1 million loan balance remains unchanged.

At the end of the 5 years, the borrower must repay the full £1 million in one go. This could be done by:

• Refinancing with a new mortgage, possibly switching to a repayment product
• Selling the property to repay the debt
• Using business profits or other capital to pay off the loan

This approach helps reduce monthly outgoings during the loan term, which can be particularly useful for businesses focusing on cash flow or awaiting capital growth, but it does require a clear exit strategy to repay the lump sum at the end.

Why get an interest-only mortgage? 

There are several strategic benefits to choosing an interest-only commercial mortgage:

1. Improved cash flow

By lowering monthly outgoings, interest-only mortgages allow borrowers to reinvest funds into their business or other projects. This can support growth, improve cash flow, and provide greater financial flexibility during key stages of development or expansion. It’s a strategic option for those who want to make their capital work harder in the short to medium term.

2. Maximising return on investment

Interest-only commercial mortgages offer investors lower monthly payments, which in turn can boost rental yields and improve the overall profitability of a property portfolio.

Many of the businesses Brickflow works with choose interest-only loans as a strategic way to scale more quickly. For example, instead of taking out a full repayment mortgage on one commercial property, an investor might secure interest-only loans on two properties. This approach spreads their capital further, effectively doubling potential rental income and diversifying risk across multiple assets.

3. Flexibility for growing businesses

Interest-only terms are ideal for businesses expecting future growth or looking to reinvest profits during the early stages of a commercial property acquisition. By keeping initial repayments lower, they provide breathing room to allocate resources toward scaling operations, increasing revenue, or completing refurbishment works before switching to full capital repayments.

What are the pitfalls of interest-only mortgages?

While there are many benefits, it’s crucial to understand the risks of commercial interest-only mortgages:

• Large final payment: You’ll still owe the full capital at the end of the term. Without a solid exit strategy, this can lead to refinancing under pressure—or forced sales.
• No equity build-up: Unlike repayment mortgages, you’re not reducing your debt, which means no ownership progress until the loan is repaid.
• Higher long-term cost: Over the life of the loan, you may pay more in interest than with a repayment mortgage.
• Lender scrutiny: Interest-only mortgages often face stricter eligibility checks, especially on exit strategies and income projections.

When might an interest-only commercial mortgage be a good fit?

All types of borrowers can apply for interest-only commercial mortgages. Lenders evaluate applications according to the type of borrower, their background, their financial stability and how they plan to use the property.

1. Property investors

Buy-to-let or commercial landlords using rental income to cover interest payments, while relying on capital appreciation or refinancing later, can benefit greatly from interest-only terms. This strategy maximises monthly cash flow, making it easier to manage portfolios, cover operating costs, or invest in further acquisitions while waiting for the property’s value to grow. You can read more about stretching your equity further for your projects here. 

2. Business premises acquisition

Business owners buying their first premises may want to conserve cash while growing revenue before switching to capital repayments.

3. Seasonal businesses

Companies with uneven cash flow benefit from lower monthly obligations during quieter periods. Interest-only repayments provide flexibility to manage seasonal fluctuations or unpredictable income streams, helping businesses maintain financial stability and avoid cash flow crunches when revenue is lower.

Eligibility criteria to get an interest-only commercial mortgage 

Lenders apply rigorous criteria to ensure borrowers can eventually repay the capital, as interest-only commercial mortgages carry more risk due to the deferred repayment structure. These checks are designed to safeguard both the borrower and the lender, and to ensure the deal is financially viable from day one. Key eligibility checks include:

• Loan-to-Value (LTV): Typically capped at 60–75%. A larger deposit may be required for interest-only deals.
• Minimum deposit: Usually at least 25–40% of the property's value is required. The higher the deposit, the more favourable the terms may be, and it also demonstrates the borrower’s commitment and financial stability.
• Strong financials:  Lenders will closely examine business performance, including recent accounts, profit and loss statements, and ongoing cash flow. They need reassurance that the borrower can comfortably service the interest. For owner-occupiers, this typically means demonstrating strong, consistent revenue from the operating business within the property. In contrast, portfolio landlords or investors will usually be assessed based on the performance of their previous property investments, including rental income, yield, and capital growth.
• Exit strategy: Perhaps the most critical element of the application. Borrowers must present a credible and well-thought-out plan for repaying the capital at the end of the term, whether through the sale of the property, refinancing, or increased business revenue.
• Credit history:  A clean credit profile not only boosts approval chances but may also secure more competitive rates. Lenders are wary of missed payments or defaults, particularly when no capital is being paid down during the term.

Costs and fees to consider 

Interest-only commercial mortgages come with a number of upfront and ongoing fees. Here’s a breakdown of the most common costs, including what you can expect to pay on average:

• Interest rates: Usually higher than residential mortgages. Expect rates to range from 5% to 9%, depending on the loan type, borrower profile, and property location.
• Arrangement fees: Typically 1–2% of the loan amount, paid upfront. On a £1 million loan, this could be £10,000 to £20,000.
• Valuation fees: A full commercial valuation is required and must be paid by the borrower. Fees vary by property size and location but expect to pay around £1,000 to £3,000 for a standard commercial unit. Larger or specialist properties may cost more.
• Broker fees: Some brokers charge you directly (e.g. 0.5% to 1% of the loan amount), while others are paid by the lender. Always check how your broker is compensated.
• Exit fees: If you repay early or refinance, lenders may charge an exit or early repayment fee. This is often 1–2% of the outstanding loan but can vary.
• Legal fees: You’re responsible for both your legal costs and the lender’s. Budget £2,000 to £5,000 in total, though this can increase for more complex deals. Fees can be slightly lower in the North vs. London and the South East, where solicitor and lender panels often charge more.

Costs can vary significantly based on the property’s value, location, and use. Factoring in all fees early in the process will give you a more realistic view of total borrowing costs. Brickflow’s commercial mortgage calculator can help you get an estimate of monthly payments and compare 100+ lenders instantly. 

How to apply for an interest-only commercial mortgage 

The Traditional Way

A long, manual process:

• Contact multiple brokers with limited lender access
• Repeat forms and conversations for every lender
• Manually compare opaque rates and criteria
• Wait weeks for decisions
• And every time, start from scratch:
• Submit full financials, projections, bank statements, valuations and more
• Prove affordability and outline a credible exit strategy

The Brickflow Way

• Access 100+ lenders in one place
• Compare rates and real-time eligibility instantly
• One smart application for multiple lenders
• Upload your documents once and reuse them across the market
• Faster decisions, less admin, and complete transparency
• Get expert guidance on structuring your deal and your exit plan

Want to see how easy applying can be? Compare live commercial mortgage deals on Brickflow and streamline your next application from days to minutes.

Navigating the commercial mortgage market can be time-consuming and complex—but digital platforms like Brickflow are changing that. Here’s how we make the process faster, simpler, and more efficient:

• Compare real-time interest-only mortgage deals from 100+ UK commercial lenders in minutes
• Instantly filter by lender criteria to see which loans match your needs—no manual guesswork required
• Submit one smart application to multiple lenders, saving you hours of admin
• Get expert support from commercial mortgage specialists who can help structure your deal and plan your exit strategy
• Track interest rates, fees and eligibility using our powerful Commercial Mortgage Calculator

Whether you're looking to diversify your property portfolio or increase cash flow, Brickflow puts the power of choice and transparency at your fingertips.

Managing repayments & exit strategy 

The viability of an interest-only mortgage depends entirely on your ability to repay the full loan amount at the end of the term. Since you've only been paying the interest, the capital repayment will likely be substantial—often hundreds of thousands or even millions. If you don’t have a clear and achievable exit strategy, such as refinancing or selling the property, you risk defaulting on the loan. For this reason, your exit strategy is just as important as the initial loan.

Here are the most common ways borrowers exit an interest-only deal, with an example to show how the strategy can work in practice:

• Refinancing
  Many borrowers choose to refinance at the end of their interest-only term, switching to a repayment mortgage. This is particularly useful if the property’s value has increased and your business has grown, potentially unlocking better interest rates or a higher loan-to-value. For example, if you purchased a commercial unit for £500,000 with an interest-only loan, and the property has appreciated to £600,000 over 5–10 years, refinancing at the new value could help you access more favourable terms while starting to pay down capital.
• Selling the property
  This is a common exit route—especially for investors aiming to maximise capital growth. UK property prices have historically increased by around 4–5% annually, depending on region and asset type. Over 10 years, that could mean a 50%+ rise in value.
  For instance, if you buy a commercial property for £750,000 on an interest-only basis, and it appreciates at an average of 4.5% per year, the property could be worth over £1.15 million at the end of the term. Even though you've made no capital repayments during the term, selling at this price would allow you to repay the original loan (e.g. £750,000) and realise £400,000+ in profit, minus costs and taxes. This is how many seasoned investors scale portfolios—leveraging capital growth, not just rental income.
• Switching to a repayment mortgage
  Some lenders offer flexibility, allowing you to convert your interest-only loan into a repayment mortgage during or at the end of the term. This may be ideal if you plan to retain the property long-term but want to start reducing your debt and building equity in the asset. Brickflow can help you compare lenders that support this type of mortgage transition.

Read our expert guide to exit strategies or compare live commercial mortgage deals on Brickflow’s smart platform. With access to 100+ lenders and real-time decisioning, you can make confident, informed moves for the future.

Brickflow can help you plan your exit by comparing refinancing options in advance and connecting you with lenders who support flexible transitions.

Is an interest-only commercial mortgage right for you?

Interest-only commercial mortgages offer flexibility, improved cash flow, and the potential for higher returns; especially for experienced investors, developers, and growing businesses. But they require careful planning and a clear exit strategy.

If you’re considering this route, speak to the experts or use Brickflow’s free commercial mortgage interest-only calculator to get started. With access to over 100+ lenders and instant comparisons, we’re here to help you find the right deal faster.

Start your search today on Brickflow and see how much you could borrow on an interest-only basis.