What is a commercial investment mortgage?

A commercial investment mortgage is a long-term loan secured on an income-producing property that you let to a tenant rather than occupy yourself. It is the finance an investor uses to buy or hold a warehouse, an industrial unit or another commercial building, where the rental income the tenant pays is what services the debt. This is the central distinction that defines an investment mortgage: the lender lends against the income the property produces, not against the trade of a business that occupies it. We arrange investment mortgages as an introducer rather than a lender, placing each case with the lender whose appetite for the asset and the rental income is strongest.

This guide explains what an investment mortgage is, how it differs from an owner-occupier loan and from a residential buy-to-let, how much deposit you need, how the rental income is tested, and whether an investment loan is a sensible idea for your circumstances. We have written it for first-time commercial investors and for landlords adding industrial property to a portfolio, and we have kept the language plain. Throughout we point out where an investment mortgage fits and where a different route, such as a remortgage of an existing asset or a short bridging facility, might serve you better while a longer investment loan is arranged.

What is an investment mortgage and how does it work?

An investment mortgage is a loan secured on a property you let for rental income, repaid over an agreed term while the tenant's rent covers the cost. The lender registers a charge over the building, advances a percentage of its valuation, and looks to the rental income as the primary source of repayment. Because the property is the income engine, the lender underwrites the strength of that income above almost everything else: the rent, the lease length, the quality of the tenant and the likelihood that the space stays let.

This is what separates an investment mortgage from an owner-occupier commercial mortgage. With an owner-occupier loan the lender examines the trading accounts of the business that will use the building, because that business generates the money to repay. With an investment loan the occupying business is the tenant, not the borrower, so the lender focuses on the lease and the rent instead. The same warehouse can be funded either way, but the questions an underwriter asks, and the rate it sets, flow from which game you are playing.

An investment mortgage is also distinct from a residential buy-to-let, even though both rely on rent. A buy-to-let is secured on a dwelling let to a household, while a commercial investment mortgage is secured on commercial space let to a business under a commercial lease. The leases are longer, the tenants are companies, and the rate, term and loan to value reflect the commercial nature of the asset. We make sure the right product is in front of you, because applying for the wrong type of investment loan wastes time and money.

How much deposit do you need for an investment property loan?

Most lenders want a deposit of between twenty-five and forty percent of the property value on an investment mortgage, which means the loan typically funds sixty to seventy-five percent loan to value. So on an industrial unit valued at five hundred thousand pounds, expect to contribute roughly one hundred and twenty-five to two hundred thousand pounds of your own money. Investment deals usually sit at the more cautious end of that range, because the lender is relying on rental income from a tenant rather than on a business you control, and it wants a buffer if the property falls vacant.

The deposit is not the only cash you need. A lender charges an arrangement fee, often one to two percent of the loan, and you pay for a valuation, for legal work on both sides and usually a broker fee, with stamp duty land tax on top. We model the full cash requirement before you commit, because a deposit that looks affordable can become tight once the fees and tax are added. The deposit you can raise also influences the rate, since a lower loan to value generally earns a keener interest rate from the lender.

Where the deposit is the obstacle, there are levers. Stronger rental income or a longer lease can persuade a lender to lift the loan to value. Additional security, such as another property in the portfolio, can reduce the cash needed on the purchase. In some cases a short bridging facility raises the deposit quickly and is repaid when the investment mortgage completes, or a remortgage of an existing asset releases equity to fund the deposit. We talk these routes through rather than treating a high deposit as a fixed wall.

How do lenders assess rental income on an investment mortgage?

The rental income is the heart of an investment mortgage application, and the lender tests it through a debt service cover calculation. In simple terms, the lender wants the rent to exceed the mortgage payment by a comfortable margin, commonly expecting the rental income to cover the interest by around one and a quarter to one and a half times. So if the loan costs forty thousand pounds a year in interest, a lender wanting one and a quarter times cover needs the property to produce at least fifty thousand pounds of rent. The bigger the margin, the more comfortable the lender and the keener the rate.

The quality of the income matters as much as the amount. A long lease to a financially strong tenant, with regular rent reviews, gives the lender confidence that the income will keep flowing, which supports a higher loan to value and a better rate. A short lease, a weak tenant or a building that would be hard to re-let if the tenant left all push the lender towards a lower loan to value, a higher rate, or a request for more deposit. The valuation the lender commissions reports both the capital value and the market rental value, and the loan is built on those figures.

Where a building is empty or only part let, a standard investment mortgage is harder to secure, because the income to service the debt is not yet there. In that situation a stabilisation loan or a short bridging facility can hold the asset while it is let, with the investment mortgage refinancing it once the rental income is proven. We flag this early, because trying to place an unlet building with a term lender that wants settled income is a common reason an investment loan stalls.

Are investment property loans a good idea?

An investment mortgage is a good idea when the rental income comfortably covers the borrowing and you intend to hold the asset for the medium to long term. UK industrial property has been a favoured investment because demand for warehouse and distribution space has outpaced supply, keeping rents firm and values resilient. With prime industrial yields holding broadly stable at around 5.00 to 5.25 percent, according to Knight Frank in December 2025, the income from a well-let industrial unit is both attractive and reasonably predictable, which is what makes the investment case work.

Borrowing to invest also lets you control a larger asset for a smaller cash outlay, so the rental income and any capital growth work on the full value of the property rather than just your deposit. As long as the rent covers the interest with a margin, the loan is being serviced by the tenant rather than out of your own pocket, and over time a repayment loan builds equity in the building. For an investor with a clear strategy and a sound property, an investment mortgage can be a sensible way to grow a portfolio.

It is less wise where the income is thin, the lease is short, or the property would be hard to re-let. An investment loan turns a vacant building into a cost rather than an asset, because the interest still has to be paid whether or not a tenant is in place. If your plans for the property are uncertain, or the rental income only just covers the payment with no margin, it can be worth strengthening the position first. Because we are an arranger and not a lender, our interest is simply that the investment loan fits the asset and the income behind it.

What are the different types of investment loan for property?

There is no single investment loan; there is a family of products, and the right one depends on the asset, the timescale and what you intend to do with the property. The mainstay is the long-term commercial investment mortgage, secured on an income-producing building and repaid over many years from rental income, which is the natural home for a warehouse you intend to hold and let. For most investors buying and keeping industrial property, this is the product the rest are measured against.

Around it sit shorter and more specialised facilities. A bridging loan is a short-term investment loan used to buy quickly, perhaps at auction, or to acquire a property a term lender will not fund until it is improved or let, with the investment mortgage refinancing it once the asset is ready. A stabilisation loan holds a newly completed building through the lease-up period until its rental income is proven and a long-term loan can take over. Each of these is a stepping stone towards the long-term investment mortgage rather than a substitute for it.

The choice between them turns on income and timing. Where the property already produces settled rental income, a long-term investment mortgage is the cheapest and most straightforward route. Where the income is not yet there, because the building is empty, part let or freshly completed, a bridging or stabilisation facility carries it until it is, accepting a higher cost in exchange for funding a situation a term lender will not. We help investors read which product fits the asset in front of them, so they neither overpay for short money on a settled building nor try to place an unlet one with a lender that wants proven income.

How does an investment mortgage compare with refinancing an existing property?

An investment mortgage funds a new purchase, but investors often have a choice between borrowing against the property they are buying and releasing equity from one they already own. A remortgage or refinance of an existing asset can free cash to fund a deposit, or even an outright purchase, at a commercial mortgage rate that is usually cheaper than other forms of borrowing. So the question is not always how to fund this building in isolation, but how to structure the borrowing across the portfolio to the best overall effect.

Refinancing can be the more efficient route where an existing property has appreciated and holds equity that is doing nothing. Releasing that equity through a remortgage, then using it as the deposit on a new investment mortgage, lets the portfolio grow without fresh cash from outside. The trade-off is that it increases the borrowing on the existing asset, so the rental income there must still cover the larger loan with a margin, which the lender tests through the same debt service cover calculation used on any investment loan.

Often the best answer combines both: a new investment mortgage on the property being bought, part-funded by equity released from an existing one. Because we are an introducer rather than a lender, we look across your whole position rather than at a single transaction, modelling where the borrowing sits most cheaply and where the rental income comfortably supports it. The aim is that each property carries a loan its own income can service, while the portfolio as a whole grows on the most efficient mix of new lending and refinanced equity.

Can older borrowers and limited companies get an investment mortgage?

Age is far less of a barrier on an investment mortgage than on a residential one, because the lender repays itself from rental income and the value of the property rather than from the borrower's earned income or life expectancy. A seventy-year-old can often arrange a long-term investment loan, particularly through a limited company, because the property and its tenant carry the repayment. Some lenders do apply maximum age limits at the end of the term for loans to individuals, but the commercial investment market is generally more flexible, and the term is set against the asset, not the borrower's age alone.

Many investors hold commercial property through a limited company, and lenders are entirely comfortable with this. A company structure can be efficient for tax and for managing a portfolio, and the investment mortgage is secured on the property with the rental income servicing it. The lender will usually ask the directors for a personal guarantee, which means they stand behind part of the debt if the company cannot pay, and it will look at the directors' experience and the company's accounts alongside the property itself.

The shape of the borrower changes which lenders will act and on what terms, so it pays to get the structure right early. We look at whether to borrow personally, through a partnership or through a company, and we match that to lenders whose criteria fit, because an investment loan placed with the wrong lender for the borrowing entity is a common cause of delay. Getting this settled before the application keeps the rate competitive and the process smooth.