Commercial remortgage specialist guide: refinancing the premises your business owns
Every business mortgage has a clock inside it. The fixed rate ends on a known date, the early repayment charge steps down on known anniversaries, and a bridging loan has a redemption date written into the facility letter. A commercial remortgage is how a trading company resets that clock, and the owners who pay least for it tend to be the ones who started looking a year before they had to. This article is about timing and arithmetic: when to move, what it costs to move early, and what a new lender will want to see before it takes over the loan on your building.
We are Business Mortgages Broker, a trading name of Lenzie Consulting Ltd (company number 08174104). We arrange business mortgages and refinances for companies that own the premises they trade from; we are a broker, not a lender, so we do not lend money ourselves. Commercial lending to a limited company is unregulated and falls outside the FCA’s regulated mortgage perimeter. Where a deal would be regulated, for example lending to a sole trader or individual, or a property where the borrower or a close family member will live in part of it, we refer it to an appropriately authorised firm. Nothing here concerns a residential mortgage: this is finance secured on a trading business’s premises.
Georgina hosts the episode that goes with this article and walks through the refinance timeline step by step.
What does refinancing a business mortgage involve?
A commercial remortgage is a new commercial mortgage, secured on commercial property you already own, that repays the existing mortgage on that property. The new lender takes a fresh first legal charge, the old lender’s charge is removed, and the business carries on trading from the same address under new terms.
People use the word for several different jobs:
- Rate refinance. Replacing a loan whose fixed period is ending, so the business avoids the lender’s reversion rate.
- Capital raise. Borrowing more than the current balance against the premises, to fund growth, equipment or working capital.
- Bridge exit. Moving off short-term bridging finance, used to buy or improve the building quickly, onto a long-term business mortgage.
- Restructure. Changing the term, moving from interest-only to capital repayment, or consolidating business loans secured on the same property.
Can you remortgage a commercial property? Yes, and the process looks much like a purchase without a seller: a valuation, an underwriting review of the business, and legal work to swap one charge for another. Our remortgaging business premises page sets out the product itself; the sections below concentrate on the decisions around it.
When should the refinance clock start? Fixed-rate expiry and the reversion rate
Most term business mortgages are fixed for a period, often three or five years, and then revert to the lender’s standard variable rate. The reversion is usually priced as a margin over Bank Rate, which the Bank of England sets, and a new fixed or tracker deal in the indicative 6.0 to 8.0% band is priced off the same benchmark. The reversion is rarely the most competitive figure available to a business with good accounts. Drifting onto it for a year can cost more than the fees of a refinance.
A working timeline we suggest to clients:
| Months before the fix ends | What to do |
|---|---|
| 12 | Read the facility letter. Note the expiry date, the reversion basis and the early repayment charge schedule. |
| 9 | Pull together the last two years of filed accounts and up-to-date management accounts. |
| 6 | Ask us to test the market. Valuations and credit approvals take time, and some lenders will hold an offer for several months. |
| 3 | Instruct solicitors and the valuer on the chosen option. |
| 0 | Complete on the day the fix ends, so no reversion interest is paid. |
Your existing lender may offer a product switch with no new valuation or legal work. That is worth having as a benchmark, but it is one lender’s price. Speak to us before you accept it, so you know what the rest of the market would offer on the same building and the same accounts.
Is it hard to get a commercial mortgage on refinance?
Usually less so than on a purchase. The business has a payment record on the existing loan, the property has a history, and there is no deposit to find. The difficulty arises when trading has weakened since the first loan, when the property value has fallen, or when the refinance is left so late that only a handful of lenders can complete in time.
Early repayment charges: working out the break-even sum
An early repayment charge (ERC) is a fee for repaying a fixed-rate loan before the fixed period ends. It is usually a percentage of the balance repaid, and it often steps down each year, for example from 5% to 4% to 3%. The charge compensates the lender for the interest it expected to earn.
Moving early only makes sense when the interest you save is larger than everything it costs you to move. A simple break-even test does the job.
Illustrative example: a company owes £600,000 at a fixed 8.5% with 18 months of the fix left. The ERC is 2%, or £12,000. A new loan at 7.0% saves 1.5 percentage points, which is £9,000 a year of interest, or £13,500 over the remaining 18 months. Against that:
| Cost of moving now | Amount |
|---|---|
| Early repayment charge at 2% | £12,000 |
| New arrangement fee at 1% | £6,000 |
| Valuation and legal costs (illustrative) | £4,000 |
| Total cost of moving | £22,000 |
| Interest saved over 18 months | £13,500 |
In this example the company would be £8,500 worse off by moving early. The same loan with 4 years of the fix left, or a 3-point rate gap, could produce the opposite answer. The habit worth building is to run the numbers, not to assume a lower rate always wins. The ERC percentage and its step-down dates come from your facility letter, not from the new lender.
Two other points sit alongside the arithmetic:
- ERC-free windows. Some facilities allow part repayment, often 10% a year, without charge. That will not fund a full refinance, but it can reduce the balance and the ERC.
- Variable-rate loans. A loan on a tracker or variable rate often carries no ERC at all, or only a small one, which makes the refinance decision almost purely about rate and fees.
Raising capital from the premises you already own
A capital-raising commercial remortgage borrows more than the current balance, using equity that has built up as the loan has been repaid and as the property’s value has moved. The extra money goes to the business.
Illustrative example: a workshop is valued at £800,000 and the current loan is £300,000. At 75% loan to value the maximum loan is £600,000, so the business could borrow up to £300,000 more before fees, if its profits can support the higher repayments.
That last condition is the real limit. How much can I borrow against a commercial property? Lenders cap the loan twice: once by loan to value against the valuation, and again by affordability, usually tested as debt service cover. If the business makes enough profit to service £450,000 of debt but not £600,000, the loan is £450,000, however much equity the building holds.
Lenders will also want to know the purpose. Funding growth, buying equipment, paying down more expensive business finance such as asset finance or unsecured business loans, or buying a second site are all purposes they are used to seeing. Releasing cash to the directors personally is assessed more cautiously, and some lenders will not do it on an owner-occupier basis.
Can you get a 90% commercial mortgage?
Not on the property alone in the ordinary market. Typical loan to value on a commercial remortgage is 70 to 75%, up to 80% for strong cases. Borrowing above that usually means additional security, such as a charge over another property, and the cost rises with it.
Moving off a bridging loan onto a term business mortgage
Bridging finance is short-term borrowing secured on property, designed to be repaid by a sale or a refinance. Businesses use it to buy premises quickly, at auction or before accounts are ready, or to fund works that would put a mainstream lender off until they are finished. The plan is always to move onto a term loan once the reason for the bridge has passed.
The cost difference is why the exit matters. Bridging is priced monthly, at an indicative 0.70 to 0.95% a month; a term business mortgage on owner-occupied premises is priced yearly, at an indicative 6.0 to 8.0% a year.
Illustrative example: on a £400,000 bridge at 0.85% a month, interest is £3,400 a month, or £40,800 over a year. The same £400,000 on a term loan at 7.0% a year costs £28,000 in interest over a year. Every month spent on the bridge after the exit was possible costs the business roughly £1,067 more than the term loan would, and many bridges charge default interest if the redemption date passes.
To make the exit work:
- Start the refinance when you take the bridge. The term lender’s criteria should shape what the bridge is used for.
- Finish the works, and get sign-off. A term lender values the building as it stands, so incomplete works or missing building control certificates delay the refinance.
- Get the accounts current. If the bridge was taken because accounts were not ready, the refinance depends on them being filed.
- Watch the valuation. If the term lender values the property below the figure the bridge relied on, the business may need to inject cash to clear the difference.
Our page on business premises bridging explains how these short-term loans are set up with the exit in view.
Remortgage rates, fees and LTV for business property in 2026
The figures below are the indicative ranges we see for a refinance on premises the business occupies. All rates are indicative, subject to status, accounts and valuation, and none of them is an offer.
| Item | Typical range |
|---|---|
| Interest rate on a term business mortgage | 6.0 to 8.0% a year |
| Interest rate on a bridging loan | 0.70 to 0.95% a month |
| Loan to value | 70 to 75%, up to 80% for strong cases |
| Loan term | 5 to 25 years, some lenders to 30 |
| Arrangement fee | Typically 1 to 2% of the loan |
| Other costs | Valuation, the lender’s legal fees and your own solicitor |
Where a loan lands inside the band depends on the strength of the accounts, the type of property, the loan to value and the length of any fixed period. A specialist property, such as a pub, hotel or care home, is usually priced as a trading business at a higher band. Interest rates across the market move with expectations for Bank Rate, so a quote that was competitive in spring may not be in autumn.
High-street banks, challenger banks and specialist lenders all offer commercial mortgages on owner-occupied premises, and their products differ more on criteria than on headline rates. Banks often price a refinance alongside a wider relationship, so a relationship manager may ask about current accounts or other business finance; specialist lenders tend to price the property and the accounts on their own.
How to apply for a commercial remortgage
The application itself is short; the preparation is not. Before you apply, consider what the refinance is for, because a rate switch, a capital raise and a bridge exit point to different lenders. Then:
- Send us the facility letter for the current commercial mortgage, two years of accounts and current management figures.
- Choose between the options we set out, comparing total cost over the fixed period rather than the rate alone.
- Submit a full application to the chosen lender, which then instructs its valuer and its solicitors.
- Keep monthly payments on the existing loan up to date until completion: a missed payment during a refinance is hard to explain.
The Financial Conduct Authority does not regulate commercial mortgages to limited companies, so your protection comes from reading the offer carefully with your solicitor and other professional advisers, not from a regulator.
What a lender re-checks before the new loan completes
A refinance is underwritten from scratch. The new lender does not inherit the old lender’s view of the business.
The accounts
Lenders want the last two years of filed accounts, current management accounts and often a recent set of business bank statements. Many lenders test affordability against adjusted EBITDA and look for a debt service cover ratio comfortably above 1. Every limited company files its accounts at Companies House, and the lender will compare the two most recent filings with the figures you have sent. VAT returns submitted under Making Tax Digital can also be requested as evidence of current turnover. Our guide to how lenders read your accounts explains the adjustments they make.
The valuation
The new lender instructs a RICS-registered valuer, and the loan is capped at 70 to 75% of the market value that valuer reports, up to 80% for strong cases. For an owner-occupied building the report usually works on a vacant possession basis. If values have moved since you bought, this is where you find out.
Personal guarantees
Most lenders ask directors to give personal guarantees on a loan to a limited company. On a refinance, the old guarantees fall away when the old loan is repaid, and new ones are given to the new lender. Read them as carefully as you would a new purchase: the amount, whether it is joint and several, and how it can be released. Take legal advice before you sign.
Discharging the old charge and registering the new one
A legal charge is how a lender secures its loan on the property. On completion, the old lender’s charge is discharged at HM Land Registry and the new lender’s charge is registered there in its place. For a company borrower, the new charge must also be registered at Companies House within 21 days of its creation, and the old charge is shown as satisfied on the company’s public record. On a £600,000 refinance like the one in our ERC example, that is one charge satisfied and one created at HM Land Registry and at Companies House, with no change of ownership and, in a straight refinance, no stamp duty. Your solicitor and the lender’s solicitor handle both registers, but it is worth checking the Companies House record afterwards: an old charge still showing as outstanding can trouble a future lender.
Talk to us
If a fixed rate ends in the next 12 months, a bridge is approaching its redemption date, or the business wants to raise money against the building it owns, talk to us early. Matt Lenzie has 25 years in financial services, raising debt and equity, with around £400m arranged, and we can show you what the market is likely to offer before your current lender’s deadline sets the terms. Start at Business Mortgages Broker.
All figures are indicative and are not an offer of finance; every loan is subject to status, accounts and valuation. The worked examples are illustrations, not quotes. We are not tax, legal or pension advisers, so take independent advice on tax, guarantees and the legal terms of any refinance.