A commercial lender sizes the loan on what the property or the business earns, then caps it at a share of the value. The payment is tested at a stress rate, which on a five year fix is usually the rate you pay, and the income has to clear it by a margin. Whichever limit is lower sets the loan.
The loan the income supports is the income divided by the cover ratio, divided by a year of payments per pound borrowed at the stress rate: capital and interest on a repayment loan, and interest alone at 1.45x cover on an interest only start. It is then capped at your loan to value, and the lower figure is the loan. Where a higher loan to value costs more, both rates are tried and the larger loan is shown. Typical rates and tests come from mainstream commercial lenders' published criteria in September 2026; your own quote will differ.
This covers unregulated commercial lending only: investment property let to tenants, and businesses buying their own premises. A mortgage on a home you or your family live in, including a flat above a commercial unit you occupy, can be regulated and is not one we arrange.
The estimate is only as good as what goes into it.
The products behind the arithmetic.
What the calculator does not tell you.
How much can I borrow on a commercial mortgage?
The lower of two figures. The first is what the income will service: the rent on an investment, or the adjusted profit of a business buying its own premises, tested against the payment with a margin to spare. The second is a share of the value, usually up to 75% on commercial and semi-commercial property.
On most cases the income test binds first, which is why two buildings of the same value can borrow very different amounts.
What is the difference between ICR and DSCR?
Both compare income with what the loan costs. Interest cover, ICR, measures it against the interest alone, which is how an interest only loan is tested. Debt service cover, DSCR, measures it against the whole payment including capital, which is how a repayment loan is tested. Because interest alone is a smaller payment, lenders ask for more cover on it, commonly 1.45x, and the calculator does the same when you pick an interest only start.
Why does the length of the lease matter so much?
The lease is how long the rent is secured, and the loan is paid from the rent. Few lenders publish a fixed rule, and some set no minimum at all, but a lease much shorter than the loan makes every lender ask what happens when the tenant can leave.
The usual answers are a shorter term, a lower loan to value, or evidence the unit would re-let quickly. A shorter term costs more than it looks: the capital is repaid faster, so the same rent supports a smaller loan.
Why is the stress rate different from the rate I pay?
A lender wants the loan to survive a rise in rates. On a five year fix the payment is known for five years, so the main commercial lenders test at the pay rate. On a variable rate or a shorter fix they add a margin, most often 1%, and some apply a floor as well.
Do lenders use the gross rent or the net rent?
It varies. Some test the full rent the tenants pay, others take around 10% off for costs first, and service charge that is collected and passed on is never income. If you are unsure, take 10% off and you will not be surprised.
What does it cost to buy, on top of the deposit?
Stamp duty at the non-residential rates, which also apply to a building with flats in it: nothing on the first £150,000, 2% to £250,000 and 5% above. On a £1m purchase that is £39,500. Add the arrangement fee, usually around 2% of the loan, and the lender's valuation and both sides' legal fees.
Then check VAT. If the seller has opted to tax the building, VAT is charged on the price unless the sale qualifies as the transfer of a going concern, which usually means a let investment bought subject to the lease, with the buyer opting to tax as well. Where VAT is charged, a buyer that is VAT registered and has opted to tax can usually recover it, but it has to be funded on the day. A term lender will not normally lend against it, which is where a short VAT bridge comes in.
Can you arrange a mortgage on a flat above my shop that I live in?
Not usually. A mortgage on a home you or your family live in can be regulated, and we arrange unregulated lending only. A semi-commercial building let to tenants, or premises your business trades from, is fine.
What it looked like when the numbers were real.
Worth reading before you buy commercial
