How much deposit do you really need for a commercial mortgage?
The deposit is the first question every buyer asks. This guide sets out the real ranges for a commercial mortgage, why a trading hotel or pub usually needs more than a simple let investment, and the levers that reduce the cash you put in.
Most commercial mortgages need a deposit of 25 to 40 percent of the property value, meaning a loan to value of 60 to 75 percent. For a trading hospitality asset such as a hotel or pub the deposit often sits toward the higher end, because part of the value is goodwill and trade that lenders discount, so they lend against a proportion of the going-concern value rather than the full price. Owner-occupiers with strong accounts can reach the keener end, while a start-up or a weaker trade sits lower. The deposit can be reduced with additional security, a strong trading record, or by financing the fixtures and VAT separately. Figures vary by lender and trading history and are indicative only.
At a glance
- Typical deposit25 to 40 percent of value
- Loan to valueUsually 60 to 75 percent
- Hospitality tradeOften nearer the 35 to 45 percent end
- Owner-occupierCan reach the keener end
- Reduce it withExtra security or a strong record
- MinimumRarely below 20 percent without extra security
The real deposit ranges
For a standard commercial mortgage the deposit is usually 25 to 40 percent of the value, which is a loan to value of 60 to 75 percent. That is a wider and larger range than a residential mortgage, and it moves with the type of property, the strength of the income and the borrower. A well-let commercial investment with a strong tenant sits at the keener end; a trading business with income that depends on how well it is run sits lower, so the deposit is higher.
The deposit is not fixed by a rule. It is set by the lender's view of the risk, and the same asset can attract different terms from different funders, which is why placing the case with the right lender matters as much as the headline number. All figures here vary by lender and trading history and are indicative only, never an offer of credit.
Why hospitality trading assets need more
A hotel, pub or restaurant is valued as a going concern: the value reflects the fair maintainable trade a competent operator could earn, and part of that value is goodwill rather than bricks and mortar. Lenders are cautious about goodwill because it can fall if the trade falls, so they lend against a proportion of the going-concern value and expect the borrower to fund the rest. That is why a trading hospitality asset commonly needs a deposit toward the higher end of the range, more than a simple let shop or office of the same price.
A specialist lender often works to two values: the going-concern value of the trading business, and the lower bricks-and-mortar value if the trade stopped. The loan is sized against a proportion of one or both. The wider the gap between them, the more the lender leans on the bricks-and-mortar figure, and the larger the deposit tends to be. The mechanics are explained at /guides/going-concern-valuation/.
How the deposit varies by case
| Situation | Indicative deposit |
|---|---|
| Owner-occupier, strong accounts | 25 to 35 percent |
| Established trading hotel or pub | 30 to 40 percent |
| Start-up or first-time operator | 35 to 45 percent |
| Distressed or closed premises | 40 percent or more, or bridging |
| With additional property security | Lower, sometimes near 20 percent |
The pattern is consistent: the more certain the income and the more experienced the borrower, the smaller the deposit. A first-time operator buying a going concern should plan for the higher end, and a closed or unmortgageable property is often bought with bridging finance first, covered at /guides/bridging-loans-for-hospitality/, then refinanced onto a commercial mortgage once the trade is proven.
How to reduce the deposit you put in
The cash a buyer needs on day one can be lowered without asking the lender to stretch its loan to value past its comfort. The most common levers are additional security, separating out the parts of the purchase that other facilities fund, and strengthening the case the lender sees.
- Offer additional property as security, which can lift the effective loan to value against the target asset
- Fund the fixtures, fittings and equipment with asset finance at /services/asset-finance/ rather than the mortgage
- Fund the VAT on a commercial purchase with a short-term VAT loan at /services/vat-loans/ rather than your own cash
- Present a strong trading record and clear projections, which can move a lender up its range
- Use bridging to buy and reposition, then refinance onto a keener term loan once the trade is proven
Working capital and fit-out can also be funded with an unsecured business loan at /services/business-loans/, keeping more of your cash as deposit against the property itself.
How we structure the deposit
We work out the smallest sensible amount of your own cash the deal needs, then structure the rest across the right facilities: the mortgage against the going-concern value, asset finance for the equipment, a VAT loan for the tax, and any additional security that lifts the leverage. We place the mortgage with the lender whose view of the trade gives the keenest deposit, and we are honest when a case needs more equity than the buyer hoped. We are an arranger, not a lender. Start at /services/commercial-mortgages/.
How much deposit do you really need for a commercial mortgage?: common questions
What is the minimum deposit for a commercial property?
Usually 25 percent, giving a loan to value of 75 percent, though for a trading hospitality asset the practical minimum is often nearer 30 to 35 percent because lenders discount goodwill. Below 25 percent generally needs additional security or an exceptionally strong trading record. Figures vary by lender and trading history.
Can I get a commercial mortgage with a 10 percent deposit?
Rarely on the strength of the property alone. A 90 percent loan to value on commercial premises is unusual and normally only reached by adding other property as security, so the lender's overall exposure across your assets stays within its comfort. For a trading hospitality business a 10 percent deposit is not realistic without that extra security.
How much do I need to put down for a commercial mortgage?
Plan for 25 to 40 percent of the value as deposit, with a trading hotel, pub or restaurant usually toward the higher end. On top of the deposit, budget for stamp duty, VAT where it applies, legal and valuation fees, and working capital, so the total cash needed is more than the deposit alone.
Will lenders accept a 5 percent deposit on commercial property?
No. A 5 percent deposit is a residential concept and is not available on commercial lending. Commercial lenders require a substantially larger equity stake because the income depends on the business, so 25 percent is a realistic floor and hospitality trading assets typically need more.
Do I need a bigger deposit for a hotel than a shop?
Usually yes. A let shop is valued on its rent and lease, while a hotel is valued as a going concern where part of the value is goodwill that lenders discount. That extra caution means a hotel commonly needs a larger deposit than a let commercial investment of the same price. See /asset-classes/hotel-finance/.
Where can I get the money for a commercial mortgage deposit?
Common sources are cash reserves, releasing equity from another property by refinancing it at /services/refinancing/, additional security offered to the same lender, or director loans and investor equity. Asset finance and a VAT loan can also free up cash that would otherwise go into the purchase, leaving more available for the deposit.
Does a larger deposit get me a better rate?
Generally yes. A lower loan to value reduces the lender's risk, so a larger deposit tends to unlock a keener margin and a wider choice of lenders. On a trading asset it also gives more headroom on the cover tests, which can be the difference between an approval and a decline in a seasonal or recovering business.
Ready to take a deal to market?
Send us the scheme and the numbers and we will come back with a view on fundability and likely terms within one working day.