Key takeaways
- Lenders assess a care home as a trading business, not just a building.
- Key measures include earnings before interest, taxes, depreciation and amortisation (EBITDA), debt service cover (DSC), Care Quality Commission (CQC) compliance and occupancy.
- Experienced operators and first-time buyers can both be considered, but terms differ.
- From an Allica perspective, we love to see applications with at least two years of accounts, the latest CQC report and clear occupancy data.1
Why a care home mortgage works differently from a standard commercial mortgage
A care home mortgage isn’t like buying an office or a warehouse. Lenders assess a care home as a trading business. The property’s value matters, but so does how well the home performs.
They’ll look at:
- EBITDA: This metric gives the lender a simple view of the business’ operating profit.
- DSC: Whether profit comfortably covers the mortgage repayments.
- CQC compliance: How the home does in its Care Quality Commission inspections.
- Occupancy rates: How full the home is and the trends over time.
With a standard commercial property, rental income or the building’s value usually does the heavy lifting for an application. For a commercial mortgage on a care home, the specific performance of the business against industry standards is part of the consideration.
Who can apply for a care home commercial mortgage?
Established care home operators
In lending terms, “experienced” usually means at least two years as a care home owner-operator.
Established operators may be able to access larger loans, longer repayment terms and higher loan-to-value, depending on the lender and the deal. If you run several homes, a lender may assess EBITDA across the whole group, not property-by-property.
First-time buyers entering the care sector
First-time buyers can be considered by specialist lenders. They’ll typically need relevant sector experience (e.g. managerial experience), CQC registration and a stress-tested business plan.
Without an operating history, lenders look for other information to assess these applications. This could include the borrower’s background in healthcare, evidence of regulatory understanding and compliance, and occupancy projections based on provable local demand.
Compared to established operators, terms for first-time buyers can involve lower maximum loan sizes and shorter repayment terms.
What types of care home and healthcare property can be mortgaged?
At Allica, we finance several types of healthcare property. Eligibility depends on the type of operator and how you’re buying.1
| Property type | Who can apply | Purchase type |
|---|---|---|
| Elderly residential and nursing homes | Experienced operators and first-time buyers | Owner-occupied or investment |
| Specialist care (children’s learning disability, adult learning disability, adult supported living) | Experienced specialist operators with a strong regulatory track record | Owner-occupied |
| Children’s day nurseries | Experienced operators, and first-time buyers with relevant childcare qualifications or sector experience | Owner-occupied |
One more thing to think about is whether your building is purpose-built or adapted. It affects how a property is valued and can change a lender’s appetite. If you’re looking at an adapted building, let your lender know early on.
Preparing a strong care home mortgage application
Run through this list and make sure you’ve covered all elements before you approach a lender. It should help your application move faster.
- At least two full years of financial accounts, if you’re an established operator.
- CQC registration documents and your most recent inspection report, with a clear explanation of any outstanding actions or improvement notices.
- Occupancy data, both current figures and historical trends, with context for any dips.
- Property details, including whether you’ve had a professional valuation and whether the building is purpose-built.
- If you’re a first-time buyer, a detailed business plan, evidence of your sector experience and regulatory knowledge, and occupancy projections based on local demand.
- Confirmation of whether you’ll need to give a personal guarantee, which depends on the deal structure and loan-to-value.
Our guide on how to get a commercial mortgage walks through the process step-by-step.
Commercial mortgage for care homes: frequently asked questions
Can first-time buyers access a care home commercial mortgage?
Specialist lenders may consider first-time buyers who have relevant sector experience and a strong business plan.
What loan-to-value ratio can care home operators access?
It depends on several things: your experience as an operator, the property type, your CQC rating, your occupancy levels and the lender’s appetite. There isn’t one figure for everyone.
What is the minimum size of care home that can be financed?
Lenders usually set minimum thresholds, and they vary with the type of operator and the lender’s criteria. With Allica, our minimum loan value is £500,000.
Can a care home commercial mortgage be used to refinance bridging finance?
Yes. Refinancing from short-term bridging onto a longer-term commercial mortgage is well established. It’s a common route for operators who bought quickly or at auction.
Speak to Allica Bank about care home finance
We’ve got a dedicated healthcare commercial mortgage team, with sector expertise and an understanding of the nuances that come with care settings.
They’re ready to help experienced operators, first-time buyers, and investors alike.
Explore our healthcare commercial mortgages1
1 All lending is subject to status, our lending criteria, and a satisfactory credit assessment. Terms and conditions apply, see: https://www.allica.bank/healthcare-commercial-mortgages-expert-sme-banking-allica-bank
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