Commercial Mortgages for Care Homes
Investing in a care home is a significant commitment, but for the right buyer, it offers long-term stability, strong yields, and a chance to contribute to a growing social need. Whether you’re a seasoned investor expanding your healthcare portfolio or a first-time buyer entering the care sector, understanding how commercial mortgages for care homes work is essential.
Care home mortgages work by considering factors such as loan-to-value ratios, interest rates, business performance, and regulatory compliance, with lenders assessing the applicant’s experience, the care facility’s viability, and the standards set by regulatory bodies.
What Is a Commercial Mortgage for a Care Home?
A commercial care home mortgage is a business loan secured against a residential care home, nursing home, or specialist healthcare facility that generates income through the provision of care services. These mortgages are tailored to:
- Purchase existing operational care homes or other care facilities
- Refinance existing debt
- Expand or refurbish existing care facilities
- Acquire a portfolio of care homes
- Finance new start-ups with strong business plans
A commercial loan is a key financial product for acquiring, developing, or expanding a care home or care facility, providing the necessary capital to fund these projects.
Who Can Get a Care Home Mortgage?
Suitable Applicants Include:
- Experienced care home operators
- Business owners with healthcare experience
- Landlords partnering with qualified care professionals
- First-time buyers entering the care sector with robust business plans
- Limited companies or Special Purpose Vehicles (SPVs)
- First time operator: First-time operators may face additional challenges, such as demonstrating industry knowledge, establishing credibility, and providing a comprehensive business plan.
- Most lenders require first-time operators to partner with experienced managers or show strong evidence of sector research and planning.
Lenders typically assess business experience, financial track record, regulatory compliance, and property viability when underwriting a care home mortgage.
Why Invest in a Care Home?
- Resilient sector – high demand due to ageing population
- Government-backed income – many residents funded by local authorities
- Higher than average returns – often 8–12% gross yields
- Long-term tenants – residents often stay multiple years
- Operational revenue – revenue is based on service delivery, not just rent
As more people move from their own home into supported living, the demand for care facilities continues to rise. Tailored mortgage solutions can address the financial needs of care home operators, supporting both new and established businesses.
Key Eligibility Criteria
| Factor | Requirement |
|---|---|
| Experience | Preferred: 2+ years in care sector. Some lenders accept strong management teams or partnerships. Industry experience is crucial, as most lenders assess the applicant’s track record and management credentials when considering a mortgage application. |
| CQC / Regulation | Must be or become registered with the Care Quality Commission (CQC) or equivalent (e.g., CIW in Wales). In Scotland, the Care Inspectorate acts as the regulatory body, setting standards and ensuring compliance for care homes. The role of the regulatory body is vital, as it influences mortgage decisions and lender confidence. |
| Deposit / LTV | Up to 75% LTV for experienced buyers. First-time buyers may need 30–40% deposit. The purchase price of the care home directly affects the deposit required and the loan-to-value ratio. |
| Credit History | Clean or explainable adverse credit required. Lenders favour financially responsible applicants. |
| Profitability | Lenders look at EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation). Most require 1.25–1.5x debt cover. Interest rate offers are influenced by business performance and regulatory compliance. |
| Property Condition | Property must be compliant with health and safety regulations, fire systems, accessibility, and CQC standards. |
Market conditions, such as local demand and economic trends, can impact lender decisions and property valuations. Most lenders require a proven track record and strong management team to mitigate risk. Lenders typically offer up to 70–75% LTV for experienced operators, with approval timelines varying based on the complexity of the application.
Lenders Offering Care Home Mortgages
| Lender | Max LTV | Min Loan | Key Criteria | Experience Needed |
|---|---|---|---|---|
| Shawbrook Bank | 70% | £250,000 | Experienced operators, accepts SPVs | Yes – 2+ years preferred |
| HTB (Hampshire Trust Bank) | 75% | £250,000 | Strong focus on cash flow and compliance | Yes |
| Allica Bank | 70% | £500,000 | Trading care homes only | Yes – management team considered |
| Lloyds Bank (Healthcare Team) | 65% | £250,000 | Regulated borrowers only, very strong credit profile | Yes |
| NatWest (Healthcare Team) | 70% | £350,000 | Registered care home with good occupancy | Yes |
| Redwood Bank | 65% | £100,000 | Flexible criteria for smaller operators | Yes – or strong business plan |
| Together Money | 60–65% | £100,000 | Mixed-use and bridging available; terms determined on a case by case basis | No – case by case |
| Specialist Private Lenders | 60–70% | £250,000+ | Bespoke terms for complex or new operations; terms determined on a case by case basis | Flexible |
Specialist lenders and debt funds provide funds for care home purchases, often working with brokers to deliver tailored solutions. Experienced operators may access favourable terms, such as lower interest rates or higher LTVs, based on their track record and regulatory compliance.
Documents You’ll Need
When applying for a commercial mortgage on a care home, be prepared to provide:
- 2–3 years of business accounts (or forecast if new)
- CQC registration and inspection reports
- Business plan for new operators
- Proof of ID, address, and qualifications
- Property details including floor plans, condition report, and fire safety systems
- Occupancy rate and fee structure
- Profit & loss forecasts (EBITDA)
- Regulatory compliance documentation
A thorough mortgage application with comprehensive supporting documentation is essential for a successful application and to meet lender requirements.
New Start-Ups & First-Time Buyers
It’s entirely possible for first-time care home buyers to secure a mortgage especially with:
- A strong CV or qualified care manager in place
- Comprehensive business plan (including market research)
- Realistic financial forecasts
- A suitable deposit (usually 30–40%)
- A clean credit profile
Pairing with a business partner who has operational experience can also strengthen your application.
Refinancing an Existing Care Home
Refinancing your care home can help you:
- Release capital for improvements or expansion
- Consolidate existing business debt
- Secure better interest rates or longer terms
- Switch lenders due to changes in CQC ratings or profitability
Refinancing can be used to fund improvements, expansion, or provide the necessary capital for refurbishment or development of your care facility.
Many lenders are open to refinancing, provided the home has a solid occupancy rate (typically 80%+) and a history of profitability.
Key Risks and What to Watch Out For
- CQC Ratings: Poor inspection results can impact loan approval and interest rates.
- Low Occupancy: Lenders typically expect >70–80% occupancy.
- Regulation Compliance: You must meet all fire safety, health, and environmental standards.
- Management Issues: Inexperienced management can be a red flag unless countered with support.
- Valuation Shortfalls: Lenders may down-value based on EBITDA, not market sales price.
- Increased scrutiny: Regulatory bodies like the CQC and Care Inspectorate have increased scrutiny of care home operators, which can affect both operational and financial aspects.
How a Specialist Broker Can Help
Navigating the care home mortgage market is complex. Working with a commercial broker ensures:
- Access to specialist healthcare lenders
- Help structuring deals for first-time operators
- Support with business plan creation
- Introduction to bridging finance if speed or refurbishment is required
- Time-saving application management from enquiry to funding
A specialist broker can help ensure a successful application by guiding you through each stage of the mortgage process, from preparing documentation to negotiating with lenders. Specialist lenders play a key role in providing tailored solutions for care home finance, addressing the unique challenges of the sector. Broker fees are typically structured based on the loan amount and complexity, and may be more favourable for larger care home operations.
Care home mortgages are a vital tool for entrepreneurs and businesses in the healthcare sector, offering tailored financing to support acquisitions, expansions, and operational improvements. While the application process can be complex, the growing demand for care services makes this a promising investment opportunity.
By working with one of the lenders mentioned in this guide and presenting a well-structured business plan, you can secure the funding needed to thrive in this rewarding sector. For additional support, consider consulting a specialist mortgage broker to navigate the nuances of care home financing.
Get help from an experienced mortgage broker.
You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders. Call us on 01332 470400 or complete the form with your details for us to give you a call back.
Why Work with Option Finance for Commercial Mortgages?
At Option Finance, we specialise in mortgages for complex credit scenarios. Our team works with all major bad credit lenders and has access to exclusive deals that aren’t available on the high street.
Understanding one’s credit report from a credit reference agency can help in securing a mortgage.
Over 20 years of experience
Full market access to specialist lenders
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Expert help with complex or recent credit issues
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FAQs
Can I get a mortgage to buy a care home?
Yes, you can secure a commercial mortgage to purchase a care home, nursing home, or specialist healthcare facility. Lenders assess your experience, business plan, regulatory compliance (such as CQC registration), and the profitability of the care home. Both experienced operators and first-time buyers may be eligible with the right setup and support.
What deposit do I need for a care home mortgage?
Most care home mortgages require a deposit of 25%–40%, depending on your experience and the lender’s criteria. First-time operators often need a larger deposit (30–40%), while experienced care providers may access up to 75% LTV (Loan to Value) with more favourable rates.
What experience do I need to get a care home mortgage?
Lenders typically expect:
-
2+ years of care sector experience
-
A qualified care manager in place
-
Or a strong CV paired with a detailed business plan
First-time operators can still qualify, especially when partnering with an experienced operator or presenting a robust plan backed by industry research and realistic financial forecasts.
What documents do I need to apply for a care home mortgage?
You’ll need to provide:
-
2–3 years of trading accounts (or detailed projections for start-ups)
-
CQC registration and reports
-
A business plan (especially for new buyers)
-
Property details (floor plans, occupancy rate, compliance reports)
-
Proof of ID and address
These help lenders assess both the viability of the care home and your ability to manage it successfully.
Which lenders offer commercial mortgages for care homes?
Specialist lenders such as Shawbrook Bank, HTB, Allica Bank, and Lloyds Healthcare Team provide tailored finance solutions for care home purchases and refinancing. Some private and challenger lenders also cater to first-time operators or complex cases, offering flexible underwriting and bespoke terms depending on the applicant’s situation.
Ready to Take the First Step?
Whether you’re a first-time buyer, remortgaging, or moving home, bad credit doesn’t have to hold you back.
Understanding credit scoring can help you prepare for a mortgage application. You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders.
