What is a business remortgage, and how does it work?
13th February 2026
By Simon Carr
A business remortgage involves refinancing your commercial property loan with a new lender, often to secure better terms or release equity. This could involve switching to a different mortgage product, changing your lender, or simply extending the repayment term. It’s a complex process with potential benefits and risks, so careful consideration is needed.
Understanding Business Remortgages
Unlike a residential remortgage, a business remortgage focuses on commercial properties used for business purposes, such as shops, offices, or industrial units. The process involves applying to a new lender for a new mortgage to repay your existing commercial mortgage. This new mortgage replaces the old one, often with different terms and conditions.
Why Consider a Business Remortgage?
Several reasons might lead a business owner to consider remortgaging their commercial property:
- Lower interest rates: Securing a lower interest rate can significantly reduce monthly payments, freeing up cash flow for business operations.
- Release equity: Remortgaging can allow you to access the equity built up in your property. This equity can be used to fund business expansion, renovations, or other investments.
- Improved repayment terms: You might be able to negotiate a longer repayment term, reducing monthly payments, or switch to an interest-only mortgage (though this carries risks, detailed below).
- Consolidate debts: A remortgage could help combine multiple business loans into a single, more manageable payment.
How a Business Remortgage Works
The process typically involves these steps:
- Assess your needs: Determine your financial goals and how much you need to borrow. Consider your property’s value and your business’s financial health.
- Shop around for lenders: Compare quotes from various lenders to secure the most competitive rates and terms. Consider specialist lenders who may be more understanding of commercial property requirements.
- Gather necessary documents: Lenders will require extensive documentation, including property details, business accounts, and personal financial information. Ensure you have everything prepared.
- Apply for a mortgage: Submit your application to your chosen lender, providing all the required information. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)
- Valuation and legal processes: The lender will arrange a valuation of your property. You’ll also need to involve solicitors to handle legal aspects of the remortgage.
- Completion: Once everything is approved, the lender will transfer the funds, paying off your existing mortgage and finalising the new loan agreement.
Risks of Business Remortgages
While a business remortgage offers potential advantages, it also carries risks:
- Interest rate fluctuations: Interest rates can change, potentially increasing your monthly payments. Ensure you understand how interest rate changes could affect your ability to repay.
- Property value fluctuations: If the value of your property decreases, you might find yourself with negative equity, where you owe more than the property is worth.
- Defaulting on repayments: Your property may be at risk if repayments are not made. Failure to make repayments could lead to legal action, repossession of the property, increased interest rates, and additional charges.
- High fees: Remortgaging involves various fees, including arrangement fees, valuation fees, and legal fees. Make sure you factor these costs into your calculations.
Interest-Only Mortgages and Business Remortgages
Some business remortgages are interest-only. This means you only pay the interest each month, not the principal amount. While this lowers monthly payments initially, it’s crucial to have a repayment strategy in place before the loan term ends. Failure to repay the capital sum at the end of the term could lead to serious financial difficulties.
When to Seek Professional Advice
Given the complexities and potential risks involved in business remortgaging, it’s essential to seek professional financial advice before proceeding. An independent financial advisor can help you assess your options, compare lenders, and make an informed decision based on your specific circumstances. They can also advise on mitigating the potential risks.
People also asked
What are the typical fees involved in a business remortgage?
Expect arrangement fees, valuation fees, and legal fees. The exact amounts will vary depending on the lender and your circumstances.
How long does a business remortgage take?
The process can generally take several weeks, or even months, depending on the complexity and the lender’s processing time.
What credit score is needed for a business remortgage?
Lenders have varying requirements, but a good credit history is essential. Check your credit report for any inaccuracies before applying.
Can I remortgage if I have a bad credit history?
It may be more difficult, and you might face higher interest rates. Some specialist lenders cater to those with less-than-perfect credit, but your options might be limited.
What happens if I miss a payment on my business remortgage?
Missing payments will negatively affect your credit score and may lead to further charges, increased interest rates, and even repossession of the property.
Where can I find more information about commercial mortgages in the UK?
You can find useful information and resources on the Government website.
Disclaimer
This information is for general guidance only and does not constitute financial advice. Always seek professional advice before making any financial decisions.