Project monthly repayments, total interest, and costs for a UK commercial property mortgage.
This calculator provides estimates for guidance only. It does not constitute financial advice. Commercial mortgage rates and terms vary by lender. Always seek advice from a qualified commercial mortgage broker.
A commercial mortgage is a loan secured against a commercial property such as an office, shop, warehouse, or mixed-use building. Unlike residential mortgages, commercial mortgages typically require larger deposits, charge higher interest rates, and have shorter terms. For businesses looking to purchase their own premises or investors seeking commercial property, understanding the true cost of borrowing is essential. In the UK, commercial mortgage rates typically range from 4% to 8%, depending on the lender, property type, borrower profile, and loan-to-value ratio. Most lenders require a minimum deposit of 20-25%, though some specialist lenders may accept higher LTV ratios for strong applications. Arrangement fees of 1-2.5% of the loan amount are standard and add significantly to the upfront cost. Commercial mortgages can be structured as repayment (capital and interest) or interest-only. This calculator uses the repayment model, where each monthly payment covers both interest and a portion of the principal. Over the term, the balance reduces to zero. Interest-only commercial mortgages require a separate repayment strategy and are typically used for shorter terms or by experienced investors. The UK commercial property market is influenced by factors including Bank of England base rate changes, commercial property yields, tenant demand, and sector-specific trends. Whether you are a business owner buying your trading premises, a property developer, or a commercial investor, this calculator provides a clear view of monthly costs and total expenditure over the full mortgage term.
To calculate your commercial mortgage costs: 1. Enter the property value. This is the purchase price or agreed value of the commercial property. Commercial property valuations can differ significantly from asking prices, so use the surveyor's valuation where possible. 2. Set the deposit percentage. Most commercial lenders require 20-25% as a minimum. A higher deposit typically secures better interest rates and terms. Enter the percentage of the property value you plan to put down as a deposit. 3. Enter the interest rate. Check with commercial mortgage brokers for current indicative rates. Rates depend on the property type, your business trading history, and the loan-to-value ratio. Variable rates are typically lower initially but carry rate-change risk. 4. Set the mortgage term. Commercial mortgage terms range from 3 to 30 years. Shorter terms reduce total interest but increase monthly payments. Consider your cash flow when choosing the term. 5. Enter the arrangement fee percentage. This is the lender's fee for setting up the mortgage, typically 1-2.5% of the loan amount. It is usually paid upfront or added to the loan (which increases the amount borrowed and therefore the total interest paid). 6. Review the results. The calculator shows your monthly repayment, total interest over the full term, and total cost including deposit and fees. The line chart shows the declining loan balance year by year.
The commercial mortgage calculator uses the standard annuity (amortisation) formula to calculate monthly repayments. The formula is: M = P x [r(1+r)^n] / [(1+r)^n - 1], where M is the monthly payment, P is the loan principal, r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments. For example, a GBP 500,000 property with a 25% deposit gives a loan of GBP 375,000. At 5.5% annual interest over 20 years (240 months), the monthly rate is 0.4583%. The monthly payment works out to approximately GBP 2,580. The total cost of the mortgage includes the total monthly payments over the full term (GBP 2,580 x 240 = approximately GBP 619,000), plus the deposit (GBP 125,000), plus the arrangement fee (GBP 375,000 x 1.5% = GBP 5,625). The total interest paid is the total of all monthly payments minus the original loan amount. The amortisation schedule shows how each payment is split between interest and principal. In the early years, a larger proportion of each payment goes to interest. As the balance reduces, more of each payment goes to principal repayment, accelerating the balance reduction towards the end of the term.
Commercial mortgages in the UK are not regulated by the Financial Conduct Authority (FCA) in the same way as residential mortgages, unless the property includes a residential element. This means fewer consumer protections apply, making independent legal and financial advice particularly important. Additional costs to budget for include commercial property survey fees (typically GBP 2,000-5,000 depending on property size), legal fees (GBP 1,500-5,000), stamp duty land tax (SDLT) on commercial property, and buildings insurance. For commercial property purchases above GBP 150,000, SDLT rates start at 2% on the portion above GBP 150,000, rising to 5% on the portion above GBP 250,000. Many commercial mortgages include early repayment charges, typically ranging from 1-5% of the outstanding balance if you repay within the initial fixed-rate period. Some lenders allow overpayments of up to 10% per year without penalty. Always check the early repayment terms before committing to a commercial mortgage.