Can you get an interest-only mortgage on commercial lending?

If you fit the eligibility requirements, you could potentially find an interest-only mortgage as a commercial borrower. However, there are some conditions you’ll need to meet if you’d like to apply for one. Here’s everything you need to know about finding and applying for interest-only mortgages to fund your business property.

What is an interest-only mortgage?

An interest-only commercial mortgage is a type of funding that allows you to delay payment for the loan by a specific number of years, during which time you only pay the interest on the loan. At the end of the term you would need to repay the entire loan, which is usually done either by seeking a new mortgage or by selling the property. It’s important to be aware that interest-only mortgages can have higher interest rates than traditional mortgages, so you’ll likely end up paying more overall.

How much does a commercial interest-only mortgage cost?

You would need to pay the amount charged in interest, the total amount extended to you, and any administrative costs.

Example: Let’s say you purchase a commercial property worth £750,000. You put down a 35% deposit, which is £262,000, so the total loan amount comes to £487,500. At a fixed 5-year interest rate of 7%, you would have to pay an estimated monthly amount of £2,843.75. At the end of the 5 years you would need to repay the full £487,500.

This is not a formal calculation – it is just an estimated number used to give you an idea of what repayments could look like.

Who is eligible for a commercial interest-only mortgage?

While eligibility varies by lender, you’ll usually need:

• A deposit of at least 25% of the total cost of the property

• To pass affordability checks

• A good track record with credit

• A business plan that demonstrates how the property will support your business goals and how you plan to repay the loan

• Information on the property you’d like to purchase

These requirements are subject to change and may vary based on the lender's policies.

How to apply for an interest-only business mortgage

Start by carefully considering what you can afford, what’s going to help you reach your business goals, and which measures you can take today to improve your mortgage application when it reaches time to hit submit. For example, if you’re still a few months or years away from applying, you might like to look into improving your business and personal credit scores and saving for a larger deposit.

When you’re ready to apply, find out which lenders are willing to extend an interest-only mortgage to you, assess their terms, and decide which one you’d like to leverage. A broker like Funding Options by Tide can help you find suitable lenders.

Finally, gather together information on the property you’d like to purchase, a business plan that demonstrates how you plan to repay the mortgage, your deposit, and any other documents that may support your application and submit them to your chosen lender.

Apply for a commercial mortgage

If you’re eligible, we may be able to help you find a suitable commercial or semi-residential mortgage. Just click the link below to find out if we can match you to our network of over 120 lenders for funding of up to £20M.

Apply for a semi-commercial mortgage

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.