Owner Occupier Commercial Mortgage: A Specialist Guide to Turning Your Rent Into Ownership
Your company has paid rent on the same unit for years. The lease is coming up for renewal, the landlord has mentioned a rent review, and the building next door has just gone on the market. The question is whether an owner occupier commercial mortgage could turn that rent into an asset the business owns. Plenty of directors assume their payment record makes the case for them: we have never missed a quarter, so surely a lender will see we can afford a mortgage. That is not how it works. A lender lending to an occupier reads the business, not the rent book, and the sooner you see your company the way an underwriter does, the sooner you know whether buying is realistic.
Business Mortgages Broker is a trading name of Lenzie Consulting Ltd (company number 08174104). We arrange business mortgages for UK trading companies that want to buy or refinance the premises they work from, and we are a broker, not a lender. Commercial lending to a limited company is unregulated and falls outside the FCA’s regulated mortgage perimeter. Where a deal would be regulated, for example lending to a sole trader or individual, or a property where the borrower or a close family member will live in part of it, we refer it to an appropriately authorised firm. We are not authorised by the Financial Conduct Authority, because the commercial mortgages we arrange for companies sit outside its regulated perimeter. Everything here concerns finance for a trading business’s own premises, never a residential mortgage.
Georgina hosts the episode below, which follows a tenant company through the decision to buy and the application that follows.
What is an owner occupier commercial mortgage?
An owner occupier commercial mortgage is a long-term loan secured on a commercial property that the borrowing business itself occupies and trades from. Lenders often call it an owner-occupied commercial mortgage; the meaning is the same. There is no outside tenant. The company that borrows is the company that operates from the building, and the loan is repaid from its trading profit.
Lenders split commercial mortgages on business properties into two broad types:
- Owner-occupied. A dental practice buying its surgery, a joinery firm buying its workshop, an accountancy practice buying its office. The lender backs the business.
- Investment. A landlord buying the same building to let to someone else. The lender backs the tenant and the lease.
The building might be identical. The lending criteria are not. That split explains almost everything else in this article, from the deposit to the documents you will be asked for. If you want the product overview first, our page on owner-occupier mortgages for trading companies covers the basics; this article focuses on the switch from renting to owning.
Why lenders read the business, not the rent
It feels unfair. A company that has paid £32,000 a year in rent without a single late payment has, on the face of it, proved it can afford £32,000 a year of property costs. Why does the lender not simply accept that?
Because rent and a mortgage are different obligations. Rent is a cost the landlord bears the risk on: if you leave, the landlord re-lets. A mortgage is a debt the lender bears the risk on: if the business fails, the lender’s only fall-back is selling a building that has just lost its occupier. So the lender has to be satisfied the business itself is durable, not just that it has been a reliable tenant.
What the underwriter actually reads:
- Two to three years of filed accounts, checked against what is on record at Companies House.
- Current management accounts, to see whether trading since the last year end has held up.
- Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation), the profit figure used to measure how many times over it covers the new debt.
- Existing borrowing, from asset finance to director loans.
- The directors, including their credit history and personal position, because a personal guarantee is normal.
Where the rent does help
The rent does not prove affordability, but it does feed into it. When the company buys, the rent stops. Lenders usually add that rent back to profit, because it is a cost that will disappear.
Illustrative example: a company reports EBITDA of £58,000 after paying £32,000 of rent. With the rent added back, adjusted EBITDA is £90,000. That higher figure is what the lender tests the mortgage against, which is why tenant companies are often in a stronger position than their accounts first suggest. If you want to test the arithmetic yourself, the calculator on our main site applies the same add-back.
How much deposit does a trading company need?
Most lenders active in owner-occupier lending advance 70 to 75% of the lower of the price and the valuation, and up to 80% for strong cases. So a company should plan for a deposit of 25 to 30%, and 20% at best.
The deposit is only part of the cash. Stamp duty, the arrangement fee, legal costs and the valuation all come on top, and none of them can be added to the loan.
Illustrative example: a company buying a £400,000 freehold unit in England at 75% loan to value.
| Cash item | Figure |
|---|---|
| Purchase price | £400,000 |
| Owner occupier loan at 75% | £300,000 |
| Deposit | £100,000 |
| Stamp Duty Land Tax | £9,500 |
| Arrangement fee at 1 to 2% | £3,000 to £6,000 |
| Legal fees, valuation, searches | Varies with the building, budget separately |
The stamp duty line uses HMRC’s non-residential SDLT bands: nothing on the first £150,000, 2% from £150,001 to £250,000 and 5% on the rest, which gives £9,500 on £400,000. Rates as at October 2026; check the current rates before you buy. In Scotland the purchase pays Land and Buildings Transaction Tax to Revenue Scotland, and in Wales Land Transaction Tax to the Welsh Revenue Authority, each with its own bands. On a £500,000 freehold the three taxes come to £14,500 (SDLT), £13,500 (LBTT) and £12,750 (LTT) on the same October 2026 rates. If the seller has opted to tax the building, VAT may also be charged on the price. We are not tax advisers, so confirm both with your accountant.
Our guide to deposits and costs for business premises breaks the remaining costs down line by line.
Can you get a 90% commercial mortgage?
Not against the building alone. Where the deposit is short, the usual routes are additional security over another property, a contribution from the directors, or buying through a pension scheme alongside a smaller loan. Each has trade-offs and none is automatic.
Alternatives to consider if the numbers do not work yet
- Stay a tenant and negotiate. A longer lease at a fixed rent can buy time to build profit and cash.
- Bridging loans. Short-term bridging finance can secure a building quickly, but it is expensive and needs a clear route to a term commercial mortgage.
- Smaller commercial property. A lower price reduces both the deposit and the stamp duty.
- Release equity elsewhere. Directors who own other commercial property sometimes remortgage it to fund the deposit, which adds risk and needs careful advice.
Owner-occupier rates, fees and terms in 2026
Owner-occupier commercial mortgage interest rates sit at an indicative 6.0 to 7.5% a year, subject to status, accounts and valuation. Lenders price commercial mortgages as a margin over Bank Rate, set by the Bank of England, or over a swap rate when the interest rate is fixed. Where a case lands in that band depends on:
- loan to value (lower usually prices better);
- the strength and trend of the accounts;
- the sector and how easy the building would be to sell;
- the size of the loan.
Fees and terms worth knowing before applying, because commercial mortgage rates are only part of the cost:
- Arrangement fee: typically 1 to 2% of the loan, often added to the loan or paid at completion.
- Term: 5 to 25 years, with some lenders going to 30. The term usually matches the business’s horizon, not the building’s life.
- Repayment basis: capital and interest is standard; short interest-only periods are possible.
- Early repayment charges: common on fixed rates, so think about whether the business might move again within the fixed period.
- Valuation and legal fees: paid by the borrower, including the lender’s solicitor.
High-street banks, challenger banks and specialist lenders all lend to owner-occupiers, but their appetite differs by sector and size. That is the part of the market a broker helps with.
Rent versus buy: the cash-flow comparison
This is the decision that matters most, and it is not purely a monthly-payment comparison.
Illustrative example: the same company pays £32,000 a year in rent. It buys a £400,000 unit with a £300,000 loan over 25 years on a capital and interest basis. Indicative, subject to status, accounts and valuation.
| Year one | At 6.0% a year | At 7.5% a year |
|---|---|---|
| Monthly mortgage payment | about £1,933 | about £2,217 |
| Annual mortgage payments | about £23,200 | about £26,600 |
| Of which interest | about £17,850 | about £22,350 |
| Of which capital repaid | about £5,350 | about £4,250 |
| Rent no longer paid | £32,000 | £32,000 |
Against the £90,000 adjusted EBITDA from earlier, those payments are covered roughly 3.4 to 3.9 times at the pay rate, comfortably above the 1.25 to 1.5 times lenders commonly look for. The monthly outgoing falls, and part of each payment builds equity rather than going to a landlord.
What the table does not show:
- Cash out of the business. About £112,500 to £115,500 leaves the company on day one in deposit, SDLT and arrangement fee, plus legal and valuation costs. That money is no longer available for stock, staff or equipment.
- Flexibility. A lease with a break clause lets you leave. Owning means selling, which takes time.
- Repairs and dilapidations. As a tenant you may face a dilapidations claim at lease end. As an owner you carry all repairs, roof included.
- Value risk. The building can fall in value as well as rise.
Our guide on rent versus buy for your business sets out the wider pros and cons. In short: buying tends to suit businesses that expect to stay put for many years and can fund the cash without starving working capital.
Who qualifies: trading history, sectors and structure
Eligibility for owner-occupied loans comes down to three things: how long and how profitably the company has traded, what it does, and how the purchase is structured.
Trading history
Most commercial mortgage lenders generally want two to three years of filed accounts showing profit, and current management accounts that do not contradict them. A younger company can sometimes borrow with a larger deposit, stronger directors or additional security, but the choice of lenders narrows.
Sectors
Offices, workshops, light industrial units, warehouses, surgeries and professional practices are the core of owner-occupier lending. Pubs, hotels, care homes and other trading businesses are priced as a separate type at an indicative 7.0 to 9.0% a year, because the value of the building is tied to the trade inside it. A building with a flat above the shop is semi-commercial, at an indicative 6.5 to 8.5%.
Structure: who should own the building?
There are three common choices, and the right one is a tax and legal question for your accountant and solicitor:
- The trading company buys it. Simplest to finance; the building sits on the company’s balance sheet.
- A separate property company buys it and leases it to the trading company. Common for ring-fencing the asset. Lenders often still assess it as owner-occupied where the companies are connected, but they will look at both.
- A pension scheme buys it. A SSAS or SIPP can buy commercial premises and let them to the business. We introduce; we do not advise. Pension advice must come from a regulated pension adviser or scheme administrator. Our pension purchase page covers the borrowing side.
Buying in the directors’ own names, as individuals, can bring the loan into regulated territory; in that case we refer it to an appropriately authorised firm.
What is the 4.5 rule for mortgages?
The 4.5 times income cap is a residential lending concept, used to limit how much a person can borrow against their salary. It does not apply to an owner-occupier business mortgage. Commercial lenders size the loan on business profit and debt service cover instead.
From enquiry to completion: the owner-occupier timeline
Buying a building while trading from another one means the journey from first call to completion matters. The steps below are the usual order; how long each takes depends on the valuer, the solicitors and the lender’s credit process, and we do not promise a date.
- Early figures. Share accounts, management accounts and the property details. We test the case against the market and show you which lenders are likely to fit.
- Indicative terms. A lender issues terms subject to underwriting, valuation and legal work.
- Application and credit. Full information goes in to meet the lender’s requirements: accounts, bank statements, director details, assets and liabilities.
- Valuation. The lender instructs a RICS valuer. A down-valuation reduces the loan at the same loan to value.
- Offer. A formal facility letter, usually with a personal guarantee from the directors.
- Legal work. Your solicitor and the lender’s solicitor deal with title, searches and the charge.
- Completion and registration. Funds are released, the legal charge is registered at HM Land Registry and, for a company borrower, at Companies House within 21 days.
After completion: remortgaging later
Owning the building gives the business a second lever later on. As the loan reduces and the building’s value moves, the company can remortgage at the end of a fixed period, or release equity to fund expansion, subject to the same tests on the accounts. Commercial remortgage pricing sits at an indicative 6.0 to 8.0% a year, subject to status, accounts and valuation.
If your lease runs out before the purchase can complete, short-term business premises bridging (indicative 0.70 to 0.95% a month, up to 70 to 75% gross) can sometimes cover the gap, with the owner-occupier loan refinancing it afterwards. Our page on how the process works sets out what we do at each stage.
Frequently asked questions
How difficult is it to get a commercial mortgage as a tenant company?
Easier than many directors expect if the accounts are solid, because the rent add-back strengthens the numbers. Harder if profit is falling, the deposit is thin or there is heavy existing debt.
Is getting an owner occupied mortgage on a building we already rent any different?
Not much, provided the landlord will sell. The lender treats it as an ordinary owner-occupier purchase, and an independent valuation still applies even if you and the landlord have agreed a price.
Do I need a broker?
No, but lender appetite varies widely by sector, size and structure, and a broker sees more of the market than any single bank.
Talk to us
If your company is weighing up whether to keep renting or buy, speak to Business Mortgages Broker. The business is led by Matt Lenzie, who has 25 years in financial services, raising debt and equity, and around £400m arranged. We will look at your accounts the way a lender would and tell you plainly whether buying works now.
Every figure in this article is indicative or illustrative, not an offer of finance, and depends on status, accounts and valuation. We are a broker, not a lender, and we are not tax, legal or pension advisers.