Typically, the average deposit required for a commercial property is roughly 30-40% of the total purchase price.

30-40% is the industry medium although some lenders offer mortgage products with around 20 or 25% deposit, although the interest rate tends to be higher than if you contributed a higher figure.

Commercial mortgages follow the same rule as residential mortgages in the aspect of a higher deposit equalling a lower interest rate. However, a going rule is that a commercial mortgage is slightly more difficult to obtain than a residential loan.

With a 30-40% deposit for your commercial mortgage, you’ll find there’ll be plenty of mortgage products for you to pick from at some very competitive rates and favourable terms.

More than likely, you will have to specify which kind of commercial mortgage you’re looking to obtain. There are two main types of commercial mortgage.

• Commercial buy-to-let mortgage

• Owner-occupier mortgage

Dependant on which mortgage you’re looking to obtain will differ the rates, deposit and terms. You’ll also provide different documentation for credit checks dependant on your mortgage option.

Does the average deposit of a commercial property vary?

Variation in the required deposit is common with different types of lenders, however, the industry average of 30-40% is consistent in the mortgage market. Deposits lower than 30% will typically come with heftier interest rates.

Who is the best lender for commercial mortgages and what is their average deposit?

According to Smallbusinessprices’ blog, the best lender is Natwest in 2023.

With just a 30% deposit required, their rates are favourable and NatWest off quality mortgage products with favourable deposits.

Types of Commercial Mortgages

Whilst a commercial mortgage is a type of mortgage in itself, there are a variety of different sub-categories of commercial mortgages as well. We’ll detail them below:

Owner-occupier commercial mortgage

This type of mortgage is one in which a business receives its loan for the purchase of premises for their own use. Tweaks can be made on the policy of lending such as inclusion of mixed-use assets, for instance a retail unit with a singular flat upstairs.

Commercial development mortgage

Commercial development mortgages are provided for the building, developing or extension of commercial premises. Lenders seek to provide these mortgages to renown or well established developers and securing the loan can be difficult in aspects. Interest rates on these mortgages are determined by the level of risk in which the lender feels they are taking on.

Commercial buy-to-let

Commercial buy to let mortgages are similar to residential buy to lets, a key difference is the security or deposit in which the lender may require and going terms and rates do vary with the aspect of commercial. In recent years, fixed rate commercial buy to let mortgages have become available and many lenders have increased flexibility with their terms.

Shepherd Commercial can advise on commercial mortgages.