An interest-only commercial mortgage keeps your monthly repayments low by paying only the interest on the loan each month, with the capital repaid at the end of the term. This structure is popular with landlords, property investors, and business owners who want to maximise cash flow. Our specialist brokers compare interest-only deals across 100+ lenders.
From 5.25%
Interest rate
Up to 75%
Loan-to-value
1-25 years
Mortgage term
£50,000
Minimum loan
An interest-only commercial mortgage is a type of commercial mortgage where the borrower pays only the interest on the loan each month, without making capital repayment. The full loan amount is repaid at the end of the term — typically through property sale, refinance, or other capital sources.
Unlike a repayment mortgage (also called a traditional mortgage or capital and interest mortgage), an interest-only mortgage keeps monthly costs significantly lower. This makes interest-only commercial products popular with property investors, landlords, and business owners who want to maximise cash flow. You pay the interest each month and plan to repay the loan at the end of the agreed mortgage term.
Interest-only commercial mortgages are particularly popular in the UK because they align with how many commercial property investors operate. By keeping monthly costs to a minimum, landlords and business owners can maximise cash flow, fund property improvements from rental income, and maintain financial flexibility. The capital is typically repaid at a natural trigger point — such as selling the property, refinancing, or receiving business proceeds. Understanding how interest-only products work, and their advantages and risks compared to capital repayment, is essential for making informed investment decisions.
Commercial mortgage rates for interest-only products range from 5.25% to 8.50%, depending on the lender, interest rate type, and borrower profile. Mortgage rates for interest-only are typically the same as for repayment mortgages — the difference is in the monthly cost, not the rate. A wider range of commercial mortgage products with interest-only options are available than ever before.
The loan term for an interest-only commercial mortgage is usually 1-25 years, with the most common being 5-15 years. During the rate period (fixed or variable), you pay only interest on the loan. At the end of the term, the full loan amount must be repaid. Some lenders offer partial capital repayment options where you can make ad-hoc capital payments alongside your interest-only repayment.
Both fixed and variable interest rate structures are available. Fixed rates offer certainty during the rate period, while variable rates may offer lower initial costs. Commercial mortgage lenders across our panel offer a full range of interest-only mortgage terms. Use our calculator to compare interest-only vs repayment costs.
Some lenders offer hybrid products that combine an initial interest-only period (typically 3-5 years) with a subsequent capital repayment phase. These products can suit investors who want lower costs during the establishment or refurbishment phase of a property investment, transitioning to capital repayment once the property is stabilised and generating full income. Other products allow voluntary capital overpayments alongside interest-only obligations, giving the borrower flexibility to reduce the loan balance when cash flow permits without being locked into higher mandatory payments. Our broker team compares all available interest-only commercial mortgage products to find the structure that best matches your investment strategy and cash flow requirements.
Eligibility for an interest-only commercial mortgage requires the borrower to demonstrate a credible strategy to repay the loan at the end of the term. Lenders need to provide evidence of your exit strategy — whether through property sale, refinance, or business revenue. The strength of your repayment plan directly affects the terms you are offered.
Interest-only mortgages are available for commercial properties including offices, retail, industrial, business premises, and buy-to-let investments. Buy-to-let mortgage products frequently use interest-only structures because landlords benefit from lower monthly costs while rental income covers the interest on the loan. Limited companies and individual business owners can apply.
Key eligibility criteria include: a deposit of at least 25% (higher for some property types), evidence of the ability to repay the loan, credit history, and the value of the property as assessed by the lender's valuation. A business plan may be required for owner-occupied premise applications. The creditor holds a first charge over the property as security.
Lenders are increasingly focused on exit strategy verification for interest-only commercial mortgages. The most common accepted exit strategies include: sale of the property at the end of the mortgage term, refinancing onto a new product, repayment from business profits or personal wealth, and portfolio rationalisation (selling one property to repay the mortgage on another). Some lenders require multiple exit strategies to provide additional comfort. Our broker team prepares detailed exit strategy documentation as part of every interest-only mortgage application, addressing lender requirements proactively and improving the chances of rapid approval.
Choosing between interest-only and capital repayment depends on your investment strategy and cash flow needs. An interest-only mortgage offers lower monthly costs, freeing up cash for other investments or business operations. A repayment mortgage costs more each month but reduces the loan amount over time, building equity in the property.
For landlords and property investors, interest-only commercial mortgages are often preferred because the lower repayment maximises rental yield. For business owners occupying their business premises, a repayment mortgage may be more appropriate as it builds outright ownership. However, a residential mortgage approach of capital repayment is not always the best strategy for commercial property.
Some commercial mortgage products allow you to switch between interest-only and capital repayment during the loan term. This flexibility can suit businesses with variable cash flow patterns. Our broker team will assess your situation and recommend the best deal — whether that is fully interest-only, full capital repayment, or a combination. A business loan alongside an interest-only mortgage can also fund capital improvements.
The tax treatment of interest-only versus capital repayment mortgages is an important consideration. For commercial property held within a company structure, mortgage interest is typically fully deductible against rental income for corporation tax purposes — making interest-only particularly tax-efficient. For individual landlords and business owners, the tax treatment depends on whether the property is classified as a trade or an investment. Our team works alongside specialist property tax advisors to ensure your mortgage structure is optimised for your tax position. The specific rate, repayment structure, and exit strategy should all be considered as part of a holistic financial planning approach.
Our broker team provides detailed comparison analyses showing the total cost difference between interest-only and capital repayment over your planned holding period. This data-driven approach ensures your decision is based on the full financial picture rather than just the monthly cost difference.
To apply for an interest-only commercial mortgage, work with a specialist mortgage finance broker who can access the full market. Our mortgage broker team compares commercial mortgage lenders across 100+ providers to find the right interest-only product for your needs. The mortgage application process typically takes 4-12 weeks from submission to completion.
You will need to provide: financial accounts (2-3 years for businesses), details of the commercial properties, evidence of rental income or business revenue, your exit strategy for repaying the loan amount, and personal identification. Mortgage lenders will commission a valuation to confirm the value of the property. For buy-to-let applications, rental income must typically cover 125-145% of the interest-only repayment.
Our team — led by Matt Lenzie with his corporate banking background at Lloyds Bank and Bank of Scotland — provides expert guidance through every stage. We are regulated by the Financial Conduct Authority. Whether you are seeking a commercial finance solution for a single property or a portfolio, we lend our expertise to secure the best mortgage rates. Contact us to discuss your interest-only commercial mortgage requirements, or use our calculator to model your costs.
Whether you are a landlord seeking to maximise rental yield, a business owner wanting to minimise premises costs, or an investor building a commercial property portfolio, our interest-only commercial mortgage expertise delivers the best outcomes. We compare products from over 100 commercial mortgage lenders, including banks, building societies, specialist finance providers, and private lenders. Each lender has different criteria for interest-only lending — some cap at 60% LTV, others extend to 75%, and terms, fees, and exit requirements all vary. Our broker team knowledge of these individual lender policies ensures your application goes to the right lender first time, avoiding unnecessary delays and credit searches.
Interest-only lending represents one of the most flexible commercial mortgage options available to UK property investors and business owners.
“Every interest only application is different. I work directly with borrowers to understand their objectives, structure the deal correctly, and present it to the right lenders. That hands-on approach consistently delivers better outcomes than going direct to a single bank.”
Matt Lenzie
Founder & Principal Broker, Commercial Mortgages Broker
Yes. Interest-only is one of the most common repayment structures for commercial mortgages, particularly for buy-to-let investments. You pay only the interest each month and repay the full loan amount at the end of the term.
At a rate of 5.50%, a £200,000 interest-only commercial mortgage would cost approximately £917 per month. At 7.00%, it would be approximately £1,167 per month. Use our calculator for a precise estimate based on current rates.
The main risk is that you must repay the full loan amount at the end of the term. If property values fall or you cannot refinance, you may need to sell the property. You also build no equity through monthly payments. A clear exit strategy is essential.
With interest-only, you pay only the interest each month and repay the capital at the end of the term. With a repayment mortgage, your monthly payment covers both interest and capital, gradually reducing the loan amount. Interest-only costs less per month but does not reduce the debt.
Many commercial mortgage products allow you to switch from interest-only to capital repayment during the loan term. Check with your lender or broker whether your specific product offers this flexibility.
Common accepted exit strategies include: sale of the property, refinancing onto a new mortgage product, repayment from business revenue or savings, and sale of other assets. The strength of your exit strategy directly affects the terms offered.