A **pub mortgage** is a specialist commercial mortgage secured against a public house, valued not on bricks-and-mortar but on the **fair maintainable trade (FMT)** of the underlying business. In 2026, pub mortgages are available primarily from a small group of specialist commercial lenders at 7.00% to 10.50% with LTVs of 50-65%, and what lenders care about most is trade quality, not the property.
As an ex-Lloyds Bank and Bank of Scotland banker who has arranged finance for wet-led pubs, gastropubs and free-of-tie freeholds, the real work is presenting trading accounts, barrelage and wet/dry margin in a way the lender's credit committee can underwrite.
What Is a Pub Mortgage?
A **pub mortgage** is a type of commercial mortgage used to buy a pub, refinance an existing pub, or release equity from a trading **public house**. It sits within the wider [commercial mortgage](/services/commercial-mortgages) market, but is treated as specialist commercial lending because the pub is a trading business as much as a property.
A pub mortgage is a type of business mortgage, but lenders price and structure it differently from a standard commercial mortgage on an office or industrial unit. The mortgage is secured against the freehold or long leasehold and the borrower is almost always a limited company operating the pub business.
**Key point:** a lender is underwriting two things at once, the property and the pub business. Both have to stack up.
How Do Pub Mortgages Work?
Pub finance works on the **profits method** of valuation. The valuer assesses what a reasonably efficient operator could earn from the pub (FMT), deducts realistic operating costs, and capitalises the resulting EBITDA at a sector multiple to arrive at a market value. The lender then lends 50-65% of that value.
The core inputs for FMT in a typical pub are:
- Barrelage: annual beer volume sold, the single most important wet-led KPI
- Wet sales margin: gross margin on drinks (free-of-tie 60-68%; tied 45-55%)
- Dry margin: gross margin on food, typically 60-70%
- Wet:dry split: ratio of liquor to food sales, which drives multiple selection
- Staff cost ratio: typically 25-35% of turnover for a well-run pub
- Rent equivalent: notional rent the operator would pay an independent landlord
The 50-65% LTV applied to that valuation is materially lower than mainstream commercial lending because the income stream is operationally driven and considered higher risk.
Pub Mortgage Rates 2026
With the Bank of England base rate at 4.50%, current pub mortgage rates sit well above the wider commercial market. Operational complexity and limited lender appetite drive a higher interest rate than borrowers expect coming from buy-to-let or standard commercial lending.
| Pub type | Typical rate | Typical LTV | Term |
|---|---|---|---|
| Free-of-tie freehold gastropub, strong trade | 7.00%-8.00% | 60-65% | 15-20 yrs |
| Wet-led free house, established | 7.50%-9.00% | 55-65% | 15-20 yrs |
| Tied pub freehold | 8.00%-9.50% | 50-60% | 15-20 yrs |
| Rural pub or community pub | 8.50%-10.00% | 50-60% | 15 yrs |
| Micropub or specialist concept | 9.00%-10.50% | 50-55% | 10-15 yrs |
| Leasehold pub (long lease) | 9.50%-10.50% | up to 50% | term within lease |
These are interest rates indicative for 2026 and assume an experienced operator with two-plus years of clean **trading accounts**. New entrants pay more, see lower headline LTV, and often need a [bridging loan](/knowledge-hub/commercial-bridging-loan-guide) to complete the purchase before refinancing onto a term commercial mortgage once trade is established.
Tied vs Free-of-Tie: Why It Matters
The tie is the most important commercial distinction in pub finance. It changes wet margin, valuation multiple, and lender appetite.
- Tied pub: contractually obliged to buy beer (and often wines, spirits, ciders) from a specific pubco or brewery at wholesale prices well above free market. Wet margin compressed to 45-55%.
- Free-of-tie freehold: operator buys from any wholesaler. Wet margin 60-68%, capturing every penny of wet upside.
A free-of-tie freehold typically commands an FMT multiple of 7x-9x EBITDA. A tied pub typically transacts at 4x-6x. On the same FMT, a free-of-tie pub may be worth 40-60% more, which feeds directly into how much you can borrow. Some lenders will not lend on tied pubs at all; a **specialist commercial mortgage broker** will know which lenders are currently writing tied deals and at what pricing.
Free-of-Tie Conversion and Gastropub Finance
A common 2026 strategy is to buy a tied pub at a tied multiple, exit the tie, and reposition as a food-led **gastropub**. Finance for these projects often combines a first-charge term commercial mortgage on the freehold, a capex facility or [bridging loan](/knowledge-hub/bridging-finance-property-refurbishment) for kitchen and refurbishment works, and a working-capital line for the post-opening trading dip. This is exactly the multi-product structure where a [specialist broker](/contact) earns the fee.
How Much Can You Borrow to Buy a Pub?
Most UK pub mortgage lenders cap LTV at 60-65% on a free-of-tie freehold with strong trading history, and 50-60% on tied pubs, leaseholds or weaker trades. A pub mortgage without trading accounts is extremely rare; expect 40%+ deposit and consider a [bridging loan](/knowledge-hub/commercial-bridging-loan-guide) instead.
Worked example for a free-of-tie freehold gastropub: FMT revenue £900,000, adjusted EBITDA after notional rent and operator salary £150,000, valuer applies a 7.5x multiple giving a market valuation of £1,125,000. A mortgage at 60% LTV produces £675,000, with a £450,000 deposit required.
Use our [commercial mortgage calculator](/calculators/commercial-mortgage) to model repayments. Repayment is normally capital-and-interest over 15-20 years; interest-only is occasionally available for experienced operators with multiple properties.
Eligibility: Who Can Get a Pub Mortgage?
Lenders assess the operator more rigorously than the property. To get a pub mortgage in 2026, you typically need:
- Experience: 2+ years running a pub or another hospitality business; ex-managed-house operators with documented P&L responsibility usually qualify
- Deposit: 35-50% of purchase price from verified sources
- Trading history: 2-3 years of certified accounts for the target pub, supported by VAT returns and bank statements
- Business plan: written plan covering proposition, staffing, suppliers, marketing, and 3-year projections
- Clean personal credit: directors and guarantors should be CCJ-free
- Net worth: lenders look for personal asset coverage of at least 50% of the loan
Being **new to the industry** is the single biggest blocker. With no hospitality experience, you will need either an experienced operating partner with equity, or an employed general manager with a documented track record. See our [commercial mortgage eligibility guide](/knowledge-hub/commercial-mortgage-eligibility) for the wider criteria across the hospitality sector and hospitality industry generally.
Types of Pub a Lender Will Consider
The **hospitality sector** is broad and lender appetite varies sharply by sub-type. Most active pub mortgage lenders will look at:
- Free-of-tie freehold pubs (wet-led, food-led, gastropub)
- Tied pub freeholds with established trade
- Long-leasehold pubs with 25+ years unexpired
- Pubs with letting rooms (treated as pub plus small hotel)
- Brewery tap rooms and micropubs (specialist appetite only)
- Rural and community pubs with strong local trade
Lenders are generally cautious on short leaseholds (under 15 years), pubs with declining barrelage, late-night vertical drinking venues, and any deal with material change-of-use risk where the lender suspects residential conversion intent.
Documents Required for a Pub Mortgage Application
The document list is heavier than a standard commercial mortgage because the lender is underwriting a trading **pub business**, not just real estate:
- 3 years of certified or audited accounts plus current management accounts
- 12 months of VAT returns and business bank statements
- Barrelage reports from the brewery/pubco
- EPOS/till summary by category (wet, food, accommodation)
- Premises licence and personal licence (DPS)
- Asset register and inventory valuation
- Lease or land registry title
- Personal asset and liability statement for each director
- Source-of-deposit evidence and business plan with 3-year projections
Active Pub Mortgage Lenders in 2026
The pool of active pub mortgage lenders is smaller than mainstream commercial lending, which is why a [specialist broker](/contact) matters.
**High street banks** (Lloyds Bank, NatWest, Barclays, HSBC) look at very strong established gastropubs in good locations with experienced operators and £750k+ deal sizes, but rarely write tied or rural pub deals.
**Challenger banks** (Allica Bank, Hampshire Trust Bank, Aldermore, Shawbrook, Recognise Bank) have meaningful pub appetite, especially for free-of-tie food-led pubs with two-plus years of clean trading.
**Specialist commercial lenders** (Together, UTB, Investec, LendInvest, Interbay Commercial, Paragon Bank) are the workhorses of pub finance. They price higher, but their commercial lending team understands FMT, barrelage and pub repositioning risk. Sector-specialist lenders such as Cambridge & Counties also have a long track record of lending against pubs and country inns.
How to Get a Pub Mortgage: Step by Step
- Engage a specialist commercial mortgage broker before your offer is accepted
- Assemble the financial pack: 3 years' accounts, VAT, bank statements, barrelage, EPOS
- Write a credible business plan with 3-year projections
- Get an indicative valuation view on FMT and likely LTV before exchanging contracts
- Submit to 3-5 shortlisted lenders via the broker; heads of terms in 5-10 working days
- Accept the best offer and instruct full RICS specialist pub valuation
- Legal due diligence and licensing transfer runs in parallel (4-8 weeks)
- Drawdown and completion: total timeline 10-14 weeks for a clean deal
This is broadly the shape of our [commercial mortgage application process](/knowledge-hub/commercial-mortgage-application-process), but pub deals routinely take an extra 2-4 weeks because of the specialist valuation and licensing work.
Refinance: When and Why
Most pub mortgages refinance every 5-7 years. Common reasons to refinance include coming off an existing fix, releasing equity for a second site, moving from bridging onto a term commercial mortgage once trade is established, restructuring after free-of-tie conversion has lifted the valuation, or improving cash flow by extending the repayment term.
A pub valued at £1.1m today on the back of a successful free-of-tie conversion may have been worth £750k as a tied pub three years earlier, real equity unlocked through refinance. Read our [commercial mortgage rates guide](/knowledge-hub/commercial-mortgage-rates-uk) for the wider rates picture.
Bridging Finance for Pub Purchases
A commercial **bridging loan** is often the right answer where a pub mortgage will not work day one: no clean trading history, an auction with 28-day completion, significant refurbishment, or a planned free-of-tie conversion. Bridging rates are 0.75%-1.10% per month, with the exit being refinance onto a pub mortgage once 12-18 months of trading data is in place.
FCA Regulation: What You Need to Know
Commercial mortgages on pubs operated as a trading **hospitality business** through a limited company are generally **unregulated**, sitting outside the **financial conduct authority** consumer lending regime. Commercial property lending to a corporate borrower is not regulated by the financial conduct authority in the same way as a residential mortgage.
However, your **specialist broker** should still be **authorised and regulated** by the FCA for any regulated activities it undertakes. Commercial Mortgages Broker maintains a clear FCA position on every product type we recommend.
**Your property may be repossessed if you do not keep up repayments on your mortgage.** Missing repayments on your mortgage can lead to enforcement action by the lender, including possession and sale of the pub.
Common Pitfalls When Financing a Pub
- Buying on asking price, not FMT: agree a price reflecting realistic FMT, or the valuer will down-value the deal
- Ignoring the tie cost: tied buying obligations wipe out 10-15% of wet margin
- Inadequate working capital: budget 3-6 months of working capital on top of the deposit
- Going to high street banks first: most do not write pub deals, you burn weeks getting to a decline
- Skipping the personal licence: the DPS must hold a valid personal licence on completion
Talk to a Specialist Pub Mortgage Broker
Financing a pub is different from other commercial property. Lenders care about barrelage, wet/dry margin, FMT and operator experience as much as the building. A generalist broker treating it as a standard commercial mortgage will get the wrong lender, the wrong product, or no offer at all.
At Commercial Mortgages Broker we are ex-bankers who have underwritten pub deals from the lender side. We know which lenders are currently writing free-of-tie freeholds, which will look at tied pubs, and how to present your application in the best light. [Contact us](/contact) about your pub purchase or refinance.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*