100% Commercial Mortgage

A commercial mortgage, or business mortgage, could be right for you if you’re looking to borrow money to buy any property for commercial use.

Typically, mainstream lenders’ maximum loan to value ratio (LTV) is around 70% but there are specialist lenders who will approve a 100% commercial mortgage, under the right circumstances.

We’ve put together this guide  so you can find out what your options are if you have no deposit in the traditional sense.

You can also read about what rates to expect under these circumstances and check whether you’re eligible for 100% finance.

Can you get a 100% commercial mortgage?

Yes. Unlike residential loans, commercial mortgages in the UK are not regulated by The Financial Conduct Authority (FCA) so lenders are free to negotiate terms and rates on a case-by-case basis.

While you won’t be approved for a 100% commercial mortgage by a high street lender, there are specialist lenders who will be happy to assess your application and negotiate terms.

However, 100% commercial mortgages are considered high risk by lenders and in most cases you will need to put up some form of asset as security against the loan.

Most lenders prefer this to be a property you own and hold equity in, but other forms of security can be acceptable.

Before applying, you must also consider how you will cover any additional costs such as:

• Legal costs (surveys, insurance etc)
• Arrangement fees
• Valuation fees

Accepted security and assets

With no deposit, most lenders will require you to put up an asset as security against the loan.

This would usually be a property you already own and hold enough equity in – i.e. an equivalent amount to the deposit requirements for the commercial mortgage deal you’re applying for.

Borrowing against your home is usually the simplest way to obtain this type of mortgage but it comes with obvious risks and you should seek professional advice before going down this route.

Another option would be to apply with a guarantor. Anybody who can demonstrate to the lender that they have sufficient wealth to cover your loan will be considered by a lender.

However, they would be liable for 100% of this debt in the event of non-payment, so finding someone whose financial advisor recommends this method can be very challenging.

Specialist commercial mortgage lenders will often consider other business assets.

Essentially, they will buy the asset from you and then lease it back. However, they will usually only lend up to 60% of the value of any single asset and typically only for equipment that’s under six years old.

Typical rates

Finding specific rates for a commercial mortgage will be quite tricky as most lenders in this area will offer bespoke rates depending on your specific business requirements, based on a wide range of determining factors. Currently (May 2023), typical interest rates for standard commercial mortgages would likely range between 4%-10%.

However, a 100% commercial mortgage is a niche product that falls outside the portfolio of many UK lenders.

For this reason, rates tend to be higher than average, with each lender offering a bespoke deal based on their own risk assessment model and your ability to put forward a strong case.

The key to securing the best rate is understanding how each lender operates and establishing ways to de-risk your application according to their criteria.

We work with brokers who have experience in providing sound advice and helping commercial clients secure 100% mortgages on the most favourable terms.

Work out your mortgage repayments

If you have a commercial property already in mind that you’d like to purchase, you can use our commercial mortgage calculator below as a guide to what the repayments could be.

How a broker can help

The business mortgage brokers we work with fully understand the 100% commercial lending sector.

They will discuss your requirements to determine whether a mortgage is likely to be approved and they have whole-of-market access to ensure you get the best rate possible.

Follow these steps to make your application as watertight as it can be :

Step 1: Create an inventory and value your assets. This could include:

• Other commercial property
• Equipment
• Client book
• Your home

One or more of these will be the collateral you need to get your loan approved.

Step 2: Make sure you have all documentation that demonstrates a 100% mortgage is viable.

You should include:

• A fully costed business plan
• Up to date bank, liability and asset statement records
• Past performance figures
• Details of all partners and directors
• Tax returns for the past three years

Step 3: Speak to a broker

Approval for one of these mortgages is dependent on matching your application to a specialist lenders’ risk model and negotiating terms and rates.

Many specialist lenders only accept applications that come via a broker. Without an expert fighting your corner, even if your application is considered it will almost certainly be rejected or approved at an excessively high rate. Make an enquiry with us and we’ll match you with a specialist advisor today.

Criteria and eligibility

When assessing your application for a 100% commercial mortgage, lenders will usually look at the following criteria:

• Security: Most lenders will insist on securing the loan against an asset with sufficient equity in lieu of a deposit.
• Profitability of your business: A strong business plan is essential given the level of risk. Without one you will fail to instil confidence in your ability to make repayments.
• Your credit rating: Adverse credit will further limit your pool of potential lenders but a broker with whole of market access will know which lenders are most sympathetic to your circumstances. If your loan is approved, it will take strong negotiating skills to get a reasonable rate.

Other things to consider include:

• Professional background of any stakeholders that might strengthen your application
• How long your business has been operating
• Demand for your product or services now and in the future

Only with an exemplary track record across all of these criteria will a lender be in a position to consider approving a 100% LTV commercial mortgage and/or offer you their best rates.

Alternative ways to borrow without a deposit

In some cases, other borrowing options will suit you better.

Other possible options for commercial borrowing include…

• 100% LTV bridging loans
• Short-term commercial loans
• Releasing equity

Bridging loans are a short term solution and require a viable exit strategy. To get one with 100% LTV, you would usually need some form of security, in the same way you would for a 100% LTV commercial mortgage.

Commercial loans generally cost more but come with shorter terms and can be a more affordable way to borrow.

The main caveat here is that they are usually capped at £25,000, which means you will likely need another source of capital on top of that if you want to buy a property.

If you already own property, you could release funds from it to act as your deposit by remortgaging.

Those who have built up enough equity can free up that capital for this purpose. This is popular among investors who have a portfolio and are looking to expand.

It’s important to look into all possible lending streams to get a complete picture of your options before making your decision.

Get matched with a specialist commercial mortgage broker

Our broker matching service will put you in touch with a mortgage broker who specialises in 100% commercial mortgages and has access to the whole market.

Borrowing with no deposit significantly reduces the number of lenders who are likely to approve a mortgage.

Approaching the right lender first time is crucial as a rejection will harm your chances of success with a further application to an alternative provider.

Call today on 0808 189 0463 or make an enquiry online and we’ll set up a free, no-obligation chat between you and a broker who specialises in these mortgages today.