How to Remortgage a Commercial Property

Remortgage a Commercial Property

To remortgage commercial property is a powerful strategy for business owners and investors looking to unlock the value of their business property. Refinancing commercial property allows you to access capital, secure a lower interest rate, or change owner-occupier status, making a commercial remortgage an effective way to achieve key business goals.

Why Consider a Commercial Remortgage?

There are several compelling reasons to remortgage a commercial property:

• Free up equity / Release equity: Leverage increased property value to access additional funds for investing in new projects or business growth.
• Lower monthly repayments / Reduce monthly outgoings: Secure a reduced rate to improve cash flow and help manage expenses more effectively.
• Save money: Remortgaging can help you save money by obtaining better interest rates or reducing overall payments.
• Consolidate debt: Combine multiple business loans into one simpler payment.
• Fund expansion: Use released capital to open new premises or upgrade equipment.
• Switch mortgage purpose: Convert owner-occupier loans to buy-to-let or investment mortgages.
• Protect against rate rises: Lock in a fixed rate before interest hikes.

Remortgaging can also help you secure a good deal by comparing offers from different lenders and negotiating better terms.

What Counts as Commercial Property?

These property types are commonly remortgaged by businesses:

• Retail Units: Stores, high street shops, restaurants.
• Office Properties: Business parks, serviced office space, co-working hubs.
• Industrial Assets: Warehouses, factories, manufacturing plants.
• Healthcare Premises: GP surgeries, dental clinics, vet practices.
• Hospitality Venues: Hotels, B&Bs, pubs.
• Land Holdings: Agricultural land or land for development.
• Mixed-Use Buildings: Combined commercial/residential properties.

All of the above are considered commercial premises for remortgaging purposes.

Each category may face different lending rules, and you’ll need to match a lender aligned with your asset type.

Step-by-Step: How to Remortgage Your Commercial Property

1. Clarify Your Objectives

• Are you aiming for more capital, lower payments, or restructuring?
• Factor in future costs: renovations, relocation, or debt payments.

2. Obtain a Commercial Valuation

• Arrange an independent surveyor’s report for a professional valuation and property valuation.
• Your property’s confirmed value influences loan-to-value (LTV) limits.
• Be aware that valuation fees may apply during this process.

3. Explore Lenders & Compare Offers

• Research high street banks, specialist lenders, and brokers.
• Compare interest rates, arrangement fees, early repayment charges (ERCs).
• Explore different refinancing options to find the best fit for your needs.

4. Prepare & Submit Remortgage Application

• Collate documents: accounts, bank statements, ID, property info, tenancy agreements (if applicable).
• Pay lender’s application fee and note that valuation fees may be required.

5. Underwriting & Due Diligence

• Lenders assess credit history, business performance, future rental income.
• Your credit report will be reviewed, and your eligibility for a secured loan will be considered.
• A Debt Service Coverage Ratio (DSCR) of 1.25+ is usually the minimum.

6. Receive the Loan Offer

• Terms include rate, LTV, loan tenure, and conditions.
• Carefully review ERCs, property-use conditions, and exit charges.
• The new loan will be used to pay off your existing mortgage.

7. Solicitors & Legal Completion

• Your solicitor prepares legal documentation and HM Land Registry searches.
• Completion happens when funds are transferred and the old loan is paid off. Compare the terms of your new loan to your current commercial mortgage and your original mortgage to ensure you are getting the best deal.

8. Post-completion Steps

• Ensure new account is active and scheduled payments set up.
• Consider adding break or early repayment flexibility.

Essential Lender Requirements

Lenders scrutinise the following:

• Loan-to-Value (LTV): Typically 50–75%, varying with asset and borrower.
• DSCR: Lenders prefer at least 1.25–1.35 as a buffer.
• Repayment Method: Interest-only or amortising principal.
• Credit History: Clean credit improves approval chances.
• Tenure / Lease Terms: Longer leases (5+ years) are more attractive.
• Occupancy Status: Occupied, tenanted, vacant—each affects risk.
• Property Condition: Avoid properties with structural issues or contamination.
• Business Stability: Minimum trading record of 2 years, proven track record, and positive business’s cash flow.
• Lenders may tailor their offers based on your particular circumstances.

It is important to choose loan terms that align with your business needs to support long-term growth and financial stability.

Documents You’ll Need

Collect these key documents before applying:

• Personal & Corporate IDs
• Address Proof: Utility bills, bank statements (< 3 months old).
• Business Financial Accounts: Last 2–3 years audited accounts.
• Bank Statements: Minimum 3–6 months for personal/business accounts.
• Valuation Report: Commissioned by lender-approved surveyor.
• Lease Agreements: Current tenant leases if applicable.
• Business Plans: Lenders may request detailed business plans to understand how the released equity will be used for future investments or projects.
• Property Deeds & Title Documents
• Previous Mortgage Statements

Remortgage Calculator and Tools

A remortgage calculator is an essential resource for business owners considering refinancing their commercial property. Simply enter the loan amount, interest rate, and term to get an instant estimate of your monthly repayments and the total cost of your commercial mortgage.

This allows you to compare different commercial remortgage options side by side, helping you make informed decisions that align with your business’s financial situation.

Unlike residential mortgage calculators, commercial remortgage calculators are designed to account for the unique aspects of commercial property financing, such as varying loan to value ratios and commercial interest rates. Some advanced calculators can also show you how much equity you could release from your property, which can be used to support business growth or pay off other debts.

Using these tools early in the process can help you understand your borrowing limits and plan for future cash flow needs, ensuring you choose the most suitable and cost-effective commercial mortgage for your business.

Can You Borrow More Than Your Current Loan?

Yes equity release is common in commercial remortgages. If property value has appreciated:

In addition to equity release, businesses may also consider alternative funding options such as asset based lending, which allows you to leverage the equity in your commercial property or other business assets for additional financing. Another option is invoice finance, where you can access funds by using unpaid invoices as collateral to help manage cash flow and meet financing needs.

Potential Ways to Use Released Equity:

• Finance new developments or premises expansion
• Consolidate existing debts or share buyouts
• Undertake refurbishments or energy efficiency upgrades
• Acquire additional investment properties

Remortgaging for Business Expansion

Remortgaging a commercial property is a strategic way for businesses to unlock capital for expansion. By releasing equity tied up in your business premises, you can access funds to invest in new equipment, expand your workforce, or enter new markets.

This approach can be more cost-effective than taking out additional business loans, as it leverages the value already built up in your property.

When considering remortgaging for business expansion, it’s important to carefully review the impact on your monthly repayments and ensure the new loan terms are manageable for your business.

Working with a commercial mortgage broker can be invaluable, they can help you navigate the remortgaging process, identify lenders who support business growth, and advise on presenting a compelling business plan. A strong business plan demonstrates to lenders how the released equity will drive increased revenue and profitability, improving your chances of approval.

Ultimately, remortgaging a commercial property can provide the financial flexibility needed to achieve your business expansion goals.

Switching from Owner-Occupier to Commercial Buy-to-Let

If you no longer occupy the property, converting to a commercial buy-to-let mortgage could be beneficial:

Pros:

• Create passive rental income
• Boost asset value based on rental yield
• Benefit from tax deductions on mortgage interest and maintenance
• Spread financial exposure by diversifying asset classes

Cons:

• Stricter LTV caps
• Void risk during unoccupied periods
• Intensive tenant tenant screening
• Ongoing landlord responsibilities

Remortgaging with Bad Credit

Remortgaging a commercial property with a less-than-perfect credit history can be challenging, but it’s not out of reach. While mainstream lenders may impose higher interest rates or stricter loan terms, there are specialist lenders who are willing to consider applications from businesses with adverse credit.

These lenders may offer more flexible solutions, such as accepting alternative forms of security or considering a second charge on the property.

If your business has a poor credit history, it’s crucial to work with a commercial mortgage broker experienced in remortgaging a commercial property under complex circumstances. They can help you understand your options, identify lenders who are open to your situation, and guide you through the application process.

To improve your chances of securing a favourable deal, take proactive steps to enhance your credit profile, pay off outstanding debts, reduce credit utilization, and ensure all payments are made on time. By addressing credit issues and seeking expert advice, you can increase your likelihood of finding a suitable commercial mortgage, even with a challenging financial history.

Best Deal Strategies for Commercial Remortgages

Securing the best deal on a commercial remortgage requires a strategic and informed approach. Start by thoroughly reviewing your existing loan agreement, paying close attention to any early repayment charges or exit fees that could affect your decision.

Next, assess your current financial situation, including your credit history, property value, and monthly repayments, to determine your eligibility for better interest rates or improved loan terms.

A commercial mortgage broker can be instrumental in helping you compare a wide range of commercial remortgage products, ensuring you find the most cost-effective solution for your needs.

Focus on the loan to value ratio, as a lower LTV can often unlock more competitive interest rates. Be prepared to provide detailed financial documentation, such as profit and loss statements, to demonstrate your business’s stability and creditworthiness.

Consulting a specialist broker can also help you access exclusive deals and navigate complex lender criteria. By taking these steps, you can secure a better deal, reduce your monthly outgoings, and ensure your new commercial mortgage supports your long-term business objectives.

Leading Commercial Remortgage Lenders (June 2025)

*Please note: mortgage rates and criteria are indicative and subject to change as of June 2025. Comparing current mortgage rates is essential for finding the best lender.

Commercial Remortgage: Advantages vs. Risks

Advantages:

• Improved monthly cash flow
• Access to growth capital
• Simplified debt management
• Ability to lock in lower rates
• Gain financial flexibility for business planning

Risks & Considerations:

• Lengthy application process
• High up-front costs & legal fees
• Risk of product churn and exit charges
• Property market volatility
• Fluctuations in property values and changes in the property’s current market can affect borrowing limits, interest rates, and remortgaging eligibility.
• Need for experienced legal and financial advice

Expert Tips for a Successful Commercial Remortgage

• Start early: Begin research 6–9 months before your current deal ends.
• Strengthen your profile: Improve credit, pay down debt, record income improvements.
• Choose the right lender: Match lender appetite to your asset type and goals.
• Consider brokers: Use whole-of-market brokers for access to specialist lenders.
• Guard against risks: Ask for break clauses or early repayment options where possible.
• Get professional help: Use solicitors and commercial mortgage brokers for due diligence.

Remortgaging commercial property requires careful planning and expert guidance to ensure you secure the best terms and maximize the benefits.

Ready to Remortgage Your Commercial Property?

We’re a whole-of-market commercial mortgage broker offering tailored advice to help you:

• Secure the lowest possible interest rate
• Access flexible lending solutions
• Navigate complex application and legal processes
• Maximise your borrowing potential

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.

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