Owner-occupier vs investment commercial mortgages

Two different credit stories

An owner-occupier commercial mortgage is repaid from the profits of the business that trades from the premises. An investment commercial mortgage is repaid from the rent paid by tenants. Lenders therefore look at very different evidence for each.

Owner-occupier assessment

Expect lenders to review two to three years of accounts, current management figures and the business's ability to cover the mortgage from profit after existing commitments. Buying premises often replaces rent, so a well-presented case shows how the new repayment compares with what the business pays today.

Investment assessment

For investment property, the lease is central: the strength of the tenant, the length of lease remaining, break clauses and the rent compared with the market. Lenders will apply a rental cover test, and multi-let properties are assessed on the stability of the overall income.

Deposit and loan to value

Commercial lenders generally require a larger deposit than residential lenders. The level depends on the property type, the strength of the business or tenants, and the borrower's experience. Specialist properties can attract lower loan to value limits.

Preparing your case

• Accounts and management figures for the trading business
• Details of the property, including any leases
• Evidence of deposit and source of funds
• Assets and liabilities statement for each director or shareholder