Glossary definition
Commercial Mortgage
A long-term loan secured against commercial, semi-commercial, or mixed-use property, used to fund acquisition, refinancing, or capital raising. Commercial mortgages typically run for 3 to 25 years with interest either fixed or variable, and are assessed primarily on the rental income and DSCR of the property.
Definition
A long-term loan secured against commercial, semi-commercial, or mixed-use property, used to fund acquisition, refinancing, or capital raising. Commercial mortgages typically run for 3 to 25 years with interest either fixed or variable, and are assessed primarily on the rental income and DSCR of the property. They are fundamentally different from development finance in that they fund stabilised, income-producing assets rather than construction projects.
See also
Closely related terms.
DSCR (Debt Service Coverage Ratio)
A financial metric that measures the ability of a property's net operating income to cover its annual debt service obligations, calculated as net operating income divided by total debt service.
ICR (Interest Cover Ratio)
A measure of how comfortably a property's rental income covers the interest payments on a loan, calculated as annual rental income divided by annual interest costs.
LTV (Loan to Value)
A lending ratio that expresses the loan amount as a percentage of the current market value of the property being used as security.
Yield
The annual return on a property investment expressed as a percentage, calculated by dividing the annual rental income by the property value.
Serviced Interest
An interest arrangement where the borrower makes regular monthly interest payments throughout the loan term, keeping the outstanding loan balance static.
Further reading
Guides that touch this term.
Guide
Commercial Mortgages in the UK: A Complete Guide
Everything you need to know about commercial mortgages in the UK - from eligibility criteria and rental coverage ratios to how lenders value multi-let properties and what lease length matters.
4 min read readReadGuide
Development Finance vs Bridging Loans: Which Do You Need?
Two of the most common short-term property finance products, but they serve very different purposes. We break down the rates, terms, and scenarios where each makes sense.
8 min read readReadGuide
Development Finance Application Checklist: Documents You Need
A comprehensive checklist covering every document lenders require for a development finance application, from development appraisals to contractor tenders and planning evidence.
11 min read readRead
Where it shows up
Finance products using this term.
Ready to apply
Knowing the term is one thing.
Getting it on your term sheet is ours.
Send us the outline. We come back with indicative pricing from the right lenders inside a working day.