Commercial mortgage for bed and breakfast

Find out what type of mortgage you need for a B&B and how you can apply for one.

Owning a guest house sounds pretty dreamy, right? Serving local food to friendly guests, entertaining and perhaps even offering quirky extras like dog care. But mints on pillows aside, how do you go about getting a mortgage for a B&B and in the current climate, are they more difficult to get approval for?

We answer these questions and more in our short guide below but feel free to send us a message if you feel unsure about anything or need a quick answer.

Do I need a commercial mortgage to buy a B&B?

Not necessarily as other finance options such as bridging finance may be more suitable for your circumstances, though a commercial mortgage is usually taken out for this type of property purchase.

We often get asked what the difference is between a commercial and residential mortgage. A commercial mortgage is used to buy a business or commercial property whereas a traditional residential mortgage is used to buy property to live in.

Some B&B owners opt for the latter because they plan to live in the guest house and often residential mortgage rates can be lower.

However, if more than 40% of the property is to be used as a commercial business, i.e. a B&B, you’ll most likely need a commercial mortgage.

How much can I borrow on a commercial B&B mortgage?

Every lender is different in terms of how they’ll assess you as a borrower. If you have credit issues or low income, you may be deemed as a less reliable borrower and therefore could be offered a lower loan. This is what’s referred to as the loan-to-value or LTV.

Some UK commercial mortgage lenders offer loans up to 75% of the property price, so borrowers will need a 25% deposit. Under those terms, a B&B valued at £300,000, would require a £75,000 deposit.

That being said, lending criteria has tightened with some lenders asking for deposits as much as 30 – 40%.

How do commercial B&B lenders assess borrowers?

To decide how much they’re willing to lend you, commercial mortgage providers will take great interest in your:

  • Personal finances
  • Credit history
  • Businesses finances and profit projections
  • Business plan including a marketing strategy
  • Experience as a B&B owner or manager

What are my next steps if I want a B&B commercial mortgage?

If you’re thinking about applying for a mortgage for a B&B business or guest house, always check your eligibility ahead of filling out an application.

Not only will this save you a lot of time in wasted admin but it can also help you avoid accidentally applying for a lender that is likely to reject you.

Make an enquiry and we can arrange for a commercial specialist to get in touch, source appropriate lenders and take you through the pros and cons of each of your options.

Speak to a mortgage broker who specialises in commercial mortgages

Through our free broker-matching service, we will pair you up with a mortgage advisor who has the right expertise for your needs and circumstances. Call us on 023 8098 0304 or make an enquiry to get started.

Contact us

Please give us a call or email if you’d like to know more about our products and services. Alternatively, you can use the contact form.

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Commercial guides

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.