How much deposit does a commercial mortgage need?

A commercial mortgage deposit is the cash stake a borrower puts into a property purchase alongside the lender's loan. It is the lender's protection against falling values and the clearest signal of the borrower's commitment, which is why it is usually the first number discussed in any application. For UK industrial property, the indicative ranges are reasonably consistent: owner-occupiers buying their own premises typically need around 20 to 30 percent of the purchase price, while investors buying units to let typically need around 30 to 35 percent. Those are starting points, not rules, and the rest of this guide explains what moves a deposit up or down.

We arrange commercial mortgages on industrial units, workshops and estates across the UK as a broker and introducer; we are not a lender, and every figure here is indicative rather than an offer of finance. Most commercial lending to businesses and investors is not regulated by the Financial Conduct Authority, although some agreements, such as loans secured against a borrower's home, are regulated, and we will flag where that applies to your case. Nothing in this guide is financial, legal or tax advice. With that said, here is how deposits actually work, where the money can come from, and what to do when the cash falls short of the asking price.

What is a commercial mortgage deposit?

A commercial mortgage deposit is the difference between the purchase price of a property and the loan a lender will advance against it. Lenders express their side of the equation as loan to value, or LTV: a 70 percent LTV mortgage on a £500,000 unit means a £350,000 loan, leaving a £150,000 deposit, which is 30 percent. Deposit and LTV are the same number seen from opposite ends, and our deposit and LTV calculator converts between them instantly for any price.

One nuance catches buyers out: lenders lend against the lower of the purchase price and their valuation. If you agree to pay £500,000 for a unit the lender's valuer puts at £460,000, a 70 percent LTV loan is 70 percent of £460,000, and the difference comes out of your pocket. On investment property some lenders also size the loan against the rental income rather than the value alone, so the working deposit can be larger than the headline LTV implies. Treat the advertised maximum LTV as a ceiling, not a promise.

The deposit does a different job from the fees. It stays invested in the property as your equity, growing or shrinking with the value, and it comes back to you on sale or refinance. Fees, stamp duty and valuation costs are spent. A sensible purchase budget keeps the two separate from the start.

How much deposit do you need for a commercial mortgage?

For an owner-occupier buying industrial premises for its own business, the indicative range is a deposit of around 20 to 30 percent, which is to say lending of around 70 to 80 percent LTV at the strongest end. Lenders lean on the trading accounts: a business with several years of profits comfortably covering the proposed mortgage payments is lending against a livelihood as well as a building, and that supports the lower deposits. Newer businesses, thinner profits or volatile sectors push the requirement towards 30 percent and sometimes beyond. We arrange owner-occupier mortgages across this whole spectrum.

For an investor buying an industrial unit or estate to let, the indicative range is a deposit of around 30 to 35 percent, so lending of around 65 to 70 percent LTV. Here the lender looks first at the rent: the loan must pass an interest cover test, with rental income exceeding interest payments by a comfortable margin, and where rents are modest relative to the price the loan shrinks regardless of LTV appetite. Industrial property's income record helps the case; Gerald Eve, a Newmark company, recorded a UK multi-let tenant default rate of just 1.4 percent in 2023, a record low, in its Multi-Let Winter bulletin 2024.

Specialist situations sit outside both ranges. Short leases, part-vacant estates, unusual buildings, heavy refurbishment needs and borrowers with credit history all push deposits higher or move the deal to bridging finance first. Semi-commercial property, owner-occupied units bought partly for investment, and trading businesses buying through a pension wrapper each carry their own conventions again. None of these ranges is a quote; they are where conversations usually start, and the right lender for one profile is frequently the wrong lender for another, which is much of the reason whole-of-market broking earns its keep on commercial purchases.

What makes a lender ask for a bigger or smaller deposit?

Covenant strength comes first. For an owner-occupier that means the trading business: its profitability, its track record, its sector and the personal position of its directors, who will usually give guarantees. For an investor it means the tenants: a unit let to an established national trade counter operator on a clean lease supports more leverage than the same unit let to a startup on a flexible agreement. Lenders read the rent roll the way they read a set of accounts, because in an investment deal the rent roll is the income.

Asset quality runs a close second. Lenders advance more against property they could sell easily if things went wrong, and modern, well-located industrial units near motorway junctions and urban centres are currently among the most liquid commercial assets in the country. Older stock with poor EPC ratings, contamination history, short remaining leases on the land, or very specialised fit-out attracts haircuts. Lease terms matter on investment deals: longer unexpired terms, regular reviews and full repairing obligations all help, while imminent expiries concentrate risk on a single date and lenders price accordingly.

Finally, the borrower's own experience moves the number. A landlord with a managed portfolio and a record of keeping units full borrows at better leverage than a first-time investor, which is one reason portfolio borrowers often consolidate assets into a single facility; our portfolio finance page explains how that works. Lenders are underwriting the person as well as the property, and they say so openly.

Does industrial property need a different deposit from other commercial property?

Not formally, but in practice the asset class helps the borrower. Lenders advance more willingly against security they believe in, and UK industrial currently has the strongest published story in commercial property. The MSCI UK Quarterly Property Index Q4 2025 results show UK industrial delivering a 7.2 percent total return over the 12 months to December 2025 and cumulative capital growth of 6 percent since the market trough in early 2024, the strongest of any property sector. A lender's credit team reads the same indices, and an asset class that has been appreciating supports the value side of the loan to value calculation in a way that struggling sectors do not.

The income side helps too. Gerald Eve, a Newmark company, put UK average prime multi-let equivalent yields at 5.45 percent at Q3 2024 in its Multi-Let Winter bulletin 2024, and forecasts multi-let rental growth averaging 4.6 percent a year over 2024 to 2028. Yields at that level mean industrial rents carry interest cover tests more comfortably than lower-yielding sectors, which on investment deals directly increases the loan the rent can support and so reduces the deposit required for a given purchase. The same logic runs in reverse for sectors where income is under pressure, where lenders quietly cap LTV below their published maximum.

None of this rescues a weak building. A poorly located unit with a failing EPC and a short lease will need a heavy deposit whatever the sector indices say, and a lender's appetite for industrial as a category never substitutes for its appetite for your specific asset. The sector tailwind sets the starting point of the conversation; the building and the borrower decide where it finishes.

How does your deposit affect the interest rate you pay?

Leverage and price are linked. A loan at 60 percent LTV is safer for the lender than the same loan at 75 percent, and most lenders express that safety as a lower margin. The difference between LTV bands is rarely dramatic on any single payment, but across a 20 year term and a six or seven figure loan it compounds into real money, so a borrower with flexibility about deposit size should price both versions before deciding. Putting in more cash is, in effect, buying a cheaper loan.

There is a second order effect that matters more on investment deals. Because lenders test interest cover, a lower rate increases the loan the rent can support; a bigger deposit can therefore secure both a cheaper margin and a more generous sizing calculation at the same time. Working the deposit, rate and rent together rather than separately is exactly the kind of structuring a broker should do before an application goes anywhere near a credit team, and it is a core part of how we place commercial mortgages.

Do not over-optimise, though. Every extra pound of deposit is a pound that cannot buy stock, fund a refurbishment or sit as a cash buffer. The cheapest mortgage is not always the best capital structure for the business or the portfolio, and the right balance is specific to your plans. A useful exercise is to price the deal at two or three deposit levels side by side, with the monthly payment, the total interest over the term and the cash left in the business shown for each, and then choose deliberately rather than defaulting to either the minimum deposit or the maximum.

How can you bridge a deposit gap?

When the deposit you have falls short of the deposit the lender wants, the gap can sometimes be structured rather than saved. Mezzanine finance is a second loan sitting behind the senior mortgage, secured by a second charge, that tops total borrowing above what the senior lender will advance alone. It is more expensive than senior debt, because it carries more risk, and senior lenders must consent to it, but used carefully it converts an unaffordable purchase into an affordable one. We arrange senior and mezzanine layers together through our mezzanine, equity and JV service so the whole stack is priced before you commit.

Equity partners and joint ventures solve the same problem with ownership instead of debt: an investor contributes deposit capital in exchange for a share of the property and its returns. This suits buyers who bring deal-finding skill, management capability or an occupier covenant but limited cash. Vendor finance is the third tool: a seller leaves part of the price outstanding as a loan or accepts deferred payments, which some lenders treat as reducing the cash you must find. Sellers agree to this more often than buyers expect, particularly on slow-moving or part-vacant estates.

1. Senior mortgage

   Take the deal as far as the senior lender will go on LTV and interest cover; this is the cheapest layer and the base of the stack.

2. Mezzanine or second charge

   Top up borrowing above the senior loan with a second charge the senior lender consents to; more expensive, used to bridge a real shortfall.

3. Equity or JV partner

   Bring in deposit capital in exchange for a share of the property, suited to buyers with deal-finding skill but limited cash.

4. Vendor finance

   Have the seller leave part of the price outstanding or accept deferred payments, common on slow-moving or part-vacant estates.

5. Additional security

   Offer a charge over another property you own so the lender advances more; in regulated territory, such as a home, this needs real care.

Additional security is the quietest solution of all. A lender taking a charge over another property you own, your trading premises, another investment unit or, in regulated territory that demands real care, a home, may advance more against the purchase because its overall security position is stronger. Each of these structures adds cost, complexity or shared ownership, so the honest test is whether the deal still works after the gap is filled, not just whether it can be filled.

Can you get a commercial mortgage with no deposit?

A genuine 100 percent commercial mortgage, with no cash and no other security, is a myth for practical purposes. What the adverts usually mean is lending at 100 percent of the purchase price against additional security: the lender advances the full price because it also holds a charge over other property with enough equity to bring the overall position back to a normal LTV. The deposit has not disappeared, it has been substituted with equity you already own, and the risk has moved onto that other asset.

The same is true of most no-money-down structures circulated online. Vendor loans, deferred consideration, mezzanine stacked on senior, and JV equity all reduce the cash the buyer personally contributes, but someone is providing the capital and being paid for the risk, and total finance costs rise with every layer. Buying significantly below market value occasionally lets a lender advance the full price against the day-one valuation, but genuine below-market purchases are rarer than listings claim, and lenders interrogate them hard.

Our advice is to treat any zero-deposit proposition with scepticism and to cost the realistic alternative instead: a properly structured purchase at sensible leverage, with the gap filled by the tools in the previous section where it must be. That deal completes, performs and refinances. Highly engineered structures have a way of failing precisely when the market turns.

What costs sit on top of the deposit?

Budget for the purchase, not just the deposit. Stamp duty land tax applies to commercial purchases above the threshold and runs to five figures on a typical industrial unit. Lender arrangement fees commonly run from around 1 to 2 percent of the loan and can sometimes be added to it. Valuation fees on commercial property are paid by the borrower and scale with the asset's complexity, and you will pay both your own solicitor and, usually, the lender's legal costs. Broker fees, where charged, should be disclosed before you commit to anything.

Two items deserve special care on industrial deals. First, VAT: where the seller has opted to tax the building, VAT is payable on the purchase price, and although a VAT-registered buyer usually recovers it, the money must be funded for weeks or months in between, sometimes with a short VAT bridging loan. Second, immediate works: surveys on older industrial stock routinely flag roofs, electrics and EPC improvements, and the realistic cost of year-one works belongs in the completion budget, not in a vague intention to deal with it later. A deposit plan that ignores these lines is not a plan.

As a rough discipline, we suggest buyers budget the deposit plus a further allowance for taxes, fees and contingencies before treating a purchase as affordable, and then keep a separate cash buffer untouched after completion. The buyers who get into trouble are rarely the ones who could not raise the deposit; they are the ones who raised exactly the deposit and nothing else, then met a quarter of empty units or a failed roof in year one with no reserves. Lenders notice the difference too, and an application showing post-completion liquidity reads better in every credit committee.

Where can the deposit come from, and how do you evidence it?

Lenders care about the source of a deposit almost as much as its size. Business cash, personal savings, proceeds from a property sale, a director's loan into the company, gifted funds from family and equity released from other property are all acceptable to most lenders, but each must be documented under anti-money-laundering rules: bank statements, completion statements, gift letters and accounts that show the money's history. Unexplained lump sums stall applications more often than weak credit does, and assembling the paper trail early is the cheapest acceleration available.

Borrowed deposits are the sensitive category. Some lenders refuse them outright; others accept structured arrangements such as declared director loans, vendor finance or disclosed second charges, provided the affordability assessment includes the extra repayments. What no lender accepts is concealment, and a hidden personal loan funding a deposit is a route to a declined application or worse. Our role as broker includes presenting the deposit story cleanly: where the money is, where it came from, and how the whole structure holds together. Deals with a clear deposit narrative get credit approval faster and on better terms, and that pattern is consistent across every lender we work with.

Timing matters as much as provenance. Deposit funds tied up in another property, a notice account or a business that cannot release them by completion are not really available, and chains of dependent transactions need honest mapping at the outset. Where money will arrive late, a bridging loan can hold the purchase together, but it must be planned rather than improvised. Get the deposit liquid, evidenced and matched to the completion timetable before the offer goes in, and the rest of the application becomes straightforward by comparison.