Key takeaways
- In the UK, commercial mortgage lenders typically expect a deposit between 25% and 40% of the property’s value.
- A larger deposit can improve your loan-to-value (LTV) ratio, which may help you access more competitive commercial mortgage rates.
- Deposits depend on context. The property you want to buy, the strength of your finances, and the lender’s risk appetite will all influence the LTV available to you.
What is a commercial mortgage deposit?
A commercial mortgage deposit is the amount of money you contribute towards the purchase of a commercial property, with your lender providing the remainder of the funding.
Commercial mortgage deposits are usually larger than residential mortgage deposits (which can be as low as 5%). The larger your deposit, the less you have to borrow and the smaller your repayments should be.
Commercial lenders typically consider factors including the property’s intended use, the financial health of the business buying it, and the risks associated with the sector. The size of your deposit can also influence a lender’s decision, as it reduces their risk and demonstrates your commitment to the investment, while providing a buffer against changes in property value.
You can learn more about how commercial mortgages work in our commercial mortgage guide or explore our commercial mortgages in more detail.1
How much deposit do you need for a commercial mortgage in the UK?
This is one of the first questions business owners ask when considering a commercial property. Rightly so, as it’s a question of costs. If the numbers don’t add up, then there’s not a lot more that can be done.
In the UK, lenders commonly expect a deposit of between 25% and 40% for a commercial mortgage. If your business is buying a £1 million property, that would mean a deposit between £250,000 and £400,000.
The exact requirement will depend on several factors, including:
- The type of property being purchased
- Whether the property will be owner-occupied or investment-led
- Your business’ financial history and forecasts
- Your own experience in the sector
- The lender’s commercial lending criteria
If a lender considers a property a straightforward security, they could potentially relax their LTV requirements. Others, such as specialist-use buildings or properties in niche sectors, can require a larger commercial mortgage deposit because they may be harder to sell if the lender needs to recover its funds.
Ultimately, there’s no one-size-fits-all answer. Property lending is bespoke, because commercial properties and the businesses that buy them are unique.
What factors affect your commercial mortgage deposit requirements?
Loan-to-value (LTV) ratio
Your LTV is a way of talking about the loan you receive as a percentage of the total property value. Lenders will often have a minimum LTV for applications.
For a £1 million property, a lender with a minimum LTV of 75% would need you to provide a deposit of at least £250,000.
A lower LTV application reduces risk for the lender and can strengthen an application but doesn’t guarantee its acceptance.
Business performance and affordability
Commercial mortgage applications are as much about the business making the application as the property itself.
Lenders typically review:
- Company accounts
- Management information
- Cash flow
- Existing borrowing commitments
- Debt servicing capacity
A strong affordability assessment may support a higher LTV request, while weaker financial performance could lead to a larger required deposit.
Property type
Different property types carry different levels of risk. To put it in ultra-simple terms: an office building and a hotel are likely to be treated differently.
The more specialised the property (or volatile its industry), the more cautious lenders may be when setting deposit requirements.
Owner-occupied versus investment properties
The size of your mortgage down payment can also be influenced by your reason for buying.
If you’re trying to buy your own premises (i.e. an owner-occupied mortgage), lenders often focus heavily on business affordability and trading performance.
If you’re buying a property to rent out to other businesses (i.e. a commercial investment mortgage), attention may shift towards rental income, tenant quality and occupancy rates.
How your deposit size affects commercial mortgage rates and costs
Your deposit does more than determine whether you can proceed with a purchase. It can also affect your overall cost of borrowing.
In general, borrowers contributing a larger commercial mortgage deposit present a lower risk profile. As a result, they may have access to more competitive commercial mortgage rates. Over a mortgage term of 15 or 20 years, even small changes in pricing can have a significant impact on total borrowing costs.
A larger deposit may also reduce your monthly repayments, improve the lender’s affordability metrics, increase your choice of lenders, and create additional flexibility during underwriting.
That said, committing more capital to a property is not always the right decision. Businesses often need to balance property investment against working capital requirements, expansion plans and other operational priorities.
This is when it can be so useful to work with a trusted advisor who knows your business. They can help you calculate the optimal deposit in your situation, based on an intimate understanding of your business, finances, and goals.
How to fund your commercial mortgage deposit
There are several ways businesses can fund a commercial mortgage deposit, from the obvious to some other, slightly more niche, approaches.
Business savings
Many businesses use retained profits or cash reserves that they’ve built up over time.
This can be a straightforward option because it demonstrates a clear source of funds and avoids additional borrowing.
And if your business is holding surplus cash (whether in preparation for a property purchase or another reason) you should review the interest rate you’re receiving. High street banks offer far lower rates than many challenger banks on instant access savings. That includes Allica, where you can earn 4.08%2 with our current account linked Savings Pot.
Investor funding
Shareholders, directors or external investors may contribute capital towards a property purchase.
Where this is the case, lenders will typically want to understand the structure of the contribution and whether the funds represent debt or equity. This is the kind of activity you should discuss with your accountant, broker, and or relationship manager – an early conversation could prevent issues further down the line.
Equity release
Business owners with existing commercial property assets may be able to release equity through refinancing or remortgaging.
This can provide access to capital without requiring a separate cash contribution from the business.
Whatever the source, lenders will normally require evidence showing where the deposit funds originated. Having funds clearly documented and readily accessible can help avoid delays during the application process.
Securing a commercial mortgage with Allica Bank
We can support established businesses looking to purchase, refinance, or invest in commercial property.
If you apply for a commercial mortgage with us, you’ll get a relationship manager who’ll support you through the process and keep you updated as your application moves through underwriting and other checks.
It’s all built on relationships – with humans involved at every step, an understanding of your business’ context, and fast decisions. Even if we have to say no this time, it’s better to know that promptly. We won’t keep you waiting, no matter the outcome.
We’ve even published an article sharing commercial mortgage application tips, so you can put your best foot forward with your application.
Looking for commercial property finance? Get all the details on our commercial mortgages.1
FAQs about commercial mortgage deposits
What is the minimum deposit for a commercial mortgage in the UK?
You can expect most lenders to ask for a minimum deposit of around 25% to 30%. Requirements vary depending on the property, your company’s financial history and forecasts, and the lender.
Some transactions may require a higher contribution where the property is considered higher risk or the business has a limited trading history.
Does a larger deposit guarantee a better commercial mortgage rate?
No. While a larger deposit can improve your LTV ratio and strengthen the application, pricing decisions also depend on affordability, financial records, sector, credit history and the characteristics of the property itself.
Can I remortgage a commercial property to release equity for a deposit on another property?
Yes, in some circumstances. Business owners may be able to refinance an existing commercial property and use released equity as a deposit for another purchase.
Lenders will typically assess the available equity, the affordability of the new borrowing and the overall strength of the transaction before approving this type of arrangement.
1 All lending is subject to status, our lending criteria, and a satisfactory credit assessment. Terms and conditions apply.
2 Rate includes standard rate of 2.83% AER (minimum balance applies) plus a 0.5% boost each month if you make 15 bank transfers out of the account in the previous month, and a 0.5% boost for six months if you complete a switch with CASS and a 0.25% Welcome Boost for 3 months for new customers who deposit £50,000+ into their Savings Pot within 14 days. Rates correct as of 19th December 2025. ‘AER’ stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. Subject to eligibility – see Savings Pot Key Product Information for more details.
Links were live and information was correct at the time of writing the article.
Disclaimer: This is information – not financial advice or recommendation
The content and materials featured in this article are for your information and education only, and are not intended to take into consideration any particular recipients’ financial situation. The product details and interest rates referred to are correct at the time of writing.
The information does not constitute financial advice or recommendation and should not be considered as such. Allica Bank will not accept any liability for any loss, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
