Occupier Mortgages
If your business currently rents its trading premises, buying the freehold instead means every payment builds equity in an asset you own, rather than disappearing as rent to a landlord who could sell up or raise rates at any point.
What an Occupier Mortgage Actually Is
An occupier mortgage, also called an owner-occupier commercial mortgage, funds the purchase of a property your own business will trade from. This is genuinely different to a commercial investment mortgage, where the property is let to a separate third-party tenant – with an occupier mortgage, your business itself is the occupant, and your trading income is what services the loan.
Why Lenders View Occupier Purchases More Favourably
Occupier mortgages are generally considered lower risk by lenders than investment purchases, since repayment depends on your own business performance rather than a tenant’s rent, and you have a direct, ongoing interest in keeping the business – and therefore the mortgage – on track. This is commonly reflected in more competitive loan-to-value terms than an equivalent investment purchase would attract.
Loan-to-Value and Deposit
Most lenders offer up to around 70-75% loan-to-value on occupier mortgages, meaning a deposit in the region of 25-30% is typically required, though this varies by lender, sector, and the strength of your trading history.
How Lenders Assess Your Application
Unlike a standard residential mortgage assessed against personal income, an occupier mortgage is assessed primarily against your business’s financial health – trading accounts, cash flow, and profitability, alongside the value of the property itself as security. Lenders will typically want to see at least two to three years of trading accounts, evidence of consistent profitability, and a clear picture of how the property fits your ongoing business plan.
Which Business Structures Can Apply
Occupier mortgages are available to sole traders, partnerships, limited companies, and Limited Liability Partnerships, and funding can be arranged for most standard business types, alongside more niche premises like holiday lets, hotels, guest houses, health clubs, pubs, restaurants, and care homes.
Repayment Structures
Occupier mortgages can be arranged on a capital repayment basis, an interest-only basis, or occasionally a mix of both, with terms commonly running from 5 to 30 years. If you’re considering interest-only, lenders will want a genuinely credible repayment strategy in place for the capital, similar in principle to a residential interest-only application.
Mixed-Use and Living Above the Business
If you’re purchasing a property with a residential element – living in a flat above your shop or premises, for example – this typically falls under a different assessment, worth discussing specifically with your broker. Our Semi Commercial Mortgages page covers this mixed-use scenario in detail.
Raising Capital From a Property You Already Own Outright
If your business already owns its premises outright, with no existing mortgage, an occupier mortgage can also be used to raise capital against that unencumbered property, or to refinance an existing facility onto better terms.
Tax Considerations Worth Discussing With Your Accountant
Owning your trading premises can bring genuine tax advantages – mortgage interest is typically an allowable business expense, reducing your corporation tax liability, and the structure you choose for ownership, whether directly by the business, by the directors personally, or through a connected pension scheme, each carries different tax implications worth discussing properly with an accountant before you commit.
What Happens When You Eventually Sell the Business
Owning your premises gives you genuine flexibility when the time comes to exit the business – you can sell the freehold alongside the business for a potentially higher combined price, or retain the property and lease it back to the new owner, creating an ongoing investment income stream for yourself while the business continues under new leadership.
Timescales
Occupier mortgages typically complete within 6-12 weeks from application, depending on the complexity of your business’s financial position and the property itself, though this can extend for more complex trading structures or unusual premises.
First-Time Commercial Buyers
If this is your first time purchasing commercial premises rather than renting, it’s worth having a genuinely clear business plan and realistic projections ready, since new or shorter-trading businesses generally face more scrutiny than established ones with a proven multi-year track record.
Frequently Asked Questions
What’s the difference between an occupier mortgage and an investment mortgage?
An occupier mortgage funds premises your own business trades from; an investment mortgage funds commercial property let to a separate tenant.
How much deposit do I need for an occupier mortgage?
Typically 25-30%, with lenders offering up to around 70-75% loan-to-value, though this varies by lender and your trading history.
How many years of trading accounts do I need?
Most lenders want at least two to three years of accounts, though this can vary depending on the strength of your application and the specific lender.
Can I get an occupier mortgage as a new business?
It’s genuinely more challenging without an established trading history, though not impossible – a strong business plan and realistic projections help, worth discussing with your broker.
Can I raise money against premises my business already owns outright?
Yes – an occupier mortgage can be used to release capital from an unencumbered property, or to refinance an existing facility.
Get in touch with details of your business and the premises you’re considering, and we’ll help you find a lender genuinely suited to your trading history and plans.
