Terms, rates and fees
How long a commercial mortgage runs, how the rate is set, what the fees are, and what the monthly payment looks like on a real loan. With worked examples.
Term
Three to twenty-five years, occasionally thirty. Owner-occupiers usually take fifteen to twenty-five years on repayment. Investors often take five to ten years interest-only, or twenty-five years with an interest-only period at the start. A shorter term means higher monthly payments but far less interest overall; the repayment calculator shows the difference.
How the rate is set
Most commercial mortgages are variable, priced as a margin over the Bank of England base rate (or occasionally the lender's own base rate or SONIA). A typical quote is "base plus 2.5%" for a strong owner-occupier, "base plus 3.5% to 5%" for investment or weaker cases. If base rate moves, your payment moves.
Fixed rates for two, three or five years are offered by most lenders at a slight premium, with an early repayment charge (typically 3% to 5% of the balance, reducing each year) if you repay during the fixed period. Some lenders offer a cap or collar instead.
What decides your margin:
- Loan-to-value. 50% LTV is priced well below 75%.
- The type of property. Offices and industrial are liked; pubs, hotels, care homes and anything with a single use are priced higher because they are harder to sell.
- The strength of the business or tenant. Three years of rising profit, or a national tenant on a fifteen-year lease, gets high street pricing. A new venture or a short lease does not.
- You. Experience, personal assets, credit history, and how the loan is structured.
- Which lender. High street cheapest, specialist dearest, challengers in between.
Typical rates in 2026
| Case | Typical rate | Typical LTV |
|---|---|---|
| Established owner-occupier, strong accounts, high street bank | 6% to 7% | up to 70% to 75% |
| Owner-occupier, challenger bank | 7% to 8.5% | up to 75% |
| Commercial investment, good tenant and lease | 7% to 8.5% | up to 65% to 70% |
| Semi-commercial (shop with flats) | 6.5% to 8.5% | up to 70% to 75% |
| Specialist: unusual property, weak history, short lease | 8.5% to 11% | up to 60% to 65% |
| Bridging (short-term, months not years) | 0.6% to 1% a month | up to 70% to 75% |
Fees
| Fee | Typical | Notes |
|---|---|---|
| Arrangement fee | 1% to 2% of the loan | Often added to the loan; 1% is normal for good cases |
| Valuation | £750 to £5,000+ | Depends on the value and type; specialist property costs more |
| Lender's legal fees | £1,000 to £3,000 | You pay these as well as your own |
| Your solicitor | £1,000 to £3,000 | Use one who does commercial property, not conveyancing |
| Broker fee | 0.5% to 1%, or a fixed fee | Usually on completion; some brokers are paid by the lender only |
| Early repayment charge | 0% to 5% | On fixed rates and some variable loans in the first years |
| Commitment or exit fee | 0% to 1% | Less common; ask |
Budget 3% to 5% of the loan for everything, on top of the deposit and stamp duty. Fees in detail, and the deposit and costs calculator.
A worked example: owner-occupier
£400,000 workshop, established business
| Price | £400,000 |
| Loan at 70% LTV | £280,000 |
| Deposit | £120,000 |
| Rate | 7.0% variable (base plus margin) |
| Term | 20 years, repayment |
| Monthly payment | about £2,170 |
| Annual payments | about £26,050 |
| Profit the lender wants to see (1.5× cover) | at least £39,000 a year before tax, after directors' pay |
| Fees (arrangement 1.5%, valuation, legals, broker) | about £12,000 |
| Stamp duty (England, non-residential) | £9,500 |
A worked example: investment
£300,000 retail unit, tenant on a 10-year lease at £27,000 a year
| Loan at 65% LTV | £195,000 |
| Rate | 7.5%, interest-only |
| Annual interest | £14,625 |
| Interest cover (rent ÷ interest) | 185%, comfortably above the 125% to 145% most lenders want |
| Stress test at rate + 2% | £18,525 interest; cover 146%, still passes |
| Net yield before tax | rent £27,000 minus interest £14,625 = £12,375 on £105,000 of deposit and fees, about 11.8% |
A note on the numbers. Rates, loan-to-value limits, fees and criteria are typical figures at the time of writing (2026). Commercial lending is priced case by case, so your own terms depend on the property, the business, the tenant and you. This is information, not advice, and not an offer of finance.
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