Source: Magnific
Choosing between a commercial mortgage and a buy to let mortgage in the UK depends on the type of property you want to buy and how you plan to use it.
Both are secured property loans, but they serve different purposes, carry different interest rates, and come with different tax and regulatory rules, especially in 2026, where new legislation has reshaped both markets.
In this guide, we’ll break down the key differences, current rates, tax implications, and how to choose the right product for your situation.
TL;DR:
- Commercial mortgages cover business use properties such as offices, retail units, and warehouses. BTL mortgages cover residential properties rented to private tenants
- Commercial rates run from 5.5% to 9% in 2026, while BTL fixed rates average between 4% and 5.75%. Commercial mortgages also require a larger deposit of 30 to 40% compared to 25% for BTL
- Individual BTL landlords face Section 24 restrictions, Making Tax Digital from April 2026, and the Renters’ Rights Act from May 2026. Limited company landlords retain full mortgage interest deductibility on both product types
- KIS Finance and other specialist brokers can access better rates and terms across both commercial and BTL products than applying to a single lender directly
What is a Commercial Mortgage?
A commercial mortgage is a secured loan used to purchase or refinance property intended for business use.
Lenders in the UK offer these to businesses, investors, and limited companies buying offices, retail units, warehouses, or mixed use buildings. The loan is secured against the property itself, and repayment terms typically run from 3 to 25 years.
KIS Finance and other specialist brokers arrange commercial mortgages in UK across both owner occupied and investment properties. Rates in 2026 range from 5.5% to 9%, depending on the lender, loan to value ratio, property type, and the financial strength of the borrower.
What is a Buy to Let Mortgage?
A buy to let mortgage (BTL) is a secured loan designed for residential properties rented out to private tenants.
Unlike commercial mortgages, lenders assess affordability based on projected rental income rather than business accounts or trading history. Most BTL mortgages are interest only, meaning the capital is repaid at the end of the term.
BTL mortgages suit several types of borrowers:
- Individual landlords buying single residential properties
- Portfolio landlords with multiple properties
- Limited company landlords seeking tax efficiency
- Expats generating UK rental income from abroad
Key Differences: Commercial Mortgages vs Buy to Let Mortgages
Commercial and buy to let mortgages differ across four areas that directly affect borrowing costs and eligibility. Here is how the two products compare side by side:
| Commercial Mortgage | Buy to Let Mortgage | |
| Property type | Offices, retail, warehouses, mixed use | Residential only |
| Typical deposit | 30 to 40% | 25% |
| Interest rates (2026) | 5.5% to 9% | 4% to 5.75% fixed |
| Lender assessment | Trading history, cashflow, tenant covenant | Rental income cover, personal income |
| Eligibility | Businesses, limited companies, investors | Individuals, landlords, limited companies |
| Mortgage structure | Repayment or interest only | Mostly interest only |
| Regulation | Less regulated | FCA regulated for residential tenants |
Remember: BTL mortgages carry lower rates and simpler criteria, while commercial mortgages offer access to a broader range of property types but require stronger financial documentation and larger deposits.
Tax and Regulation in 2026
The tax and regulatory landscape changed significantly for both mortgage types in 2026. Individual BTL landlords face the most pressure.
Section 24 restricts individual landlords from deducting mortgage interest as an expense. Instead, they receive a flat 20% tax credit, which makes higher and additional rate taxpayers materially worse off compared to limited company landlords, who still deduct finance costs in full.
Making Tax Digital became mandatory from 6 April 2026 for landlords earning above £50,000. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028, pulling the majority of landlords into digital reporting.
The Renters’ Rights Act came into force on 1 May 2026 and abolished Section 21 no fault evictions, removed fixed term tenancies, and capped rent increases to once per year at market rate. This affects BTL landlords only.
Property income tax rates will rise by 2% from April 2027, taking the basic rate to 22%, the higher rate to 42%, and the additional rate to 47%.
Commercial mortgage borrowers are not subject to the Renters’ Rights Act. However, they face bespoke lender scrutiny around tenant covenants, lease length, and business cashflow, which adds complexity to the application process.
Source: Magnific
Which One is Right for You?
The right mortgage depends on the property type, intended use, and your tax position.
Choose a buy to let mortgage if:
- You are buying a residential property to rent to private tenants
- You want lower rates and simpler lender criteria
- You operate as an individual landlord or through a limited company with a straightforward portfolio
Choose a commercial mortgage if:
- You are buying an office, retail unit, warehouse, or mixed use building
- You are a business purchasing its own trading premises
- Your portfolio includes HMOs, multi unit freehold blocks, or semi commercial properties
Semi commercial properties, such as a shop with a flat above, sit between both products. Lenders treat these as commercial rather than residential, so standard BTL criteria do not apply.
Limited company structure is worth considering for either route. Companies retain full mortgage interest deductibility, pay corporation tax at 19% to 25%, and are not yet subject to Making Tax Digital for Income Tax.
Speak to a specialist broker before applying. Commercial mortgage applications require business accounts, filed tax returns, and evidence of cashflow. BTL applications are more standardised but still vary significantly between lenders on rental cover ratios and portfolio size limits.
Final Thoughts
Commercial mortgages and buy to let mortgages serve different purposes and attract different borrowers. The right choice comes down to a few clear factors:
- Property type determines which product applies from the outset
- Tax position affects whether an individual or limited company structure makes more sense
- Deposit size and financial history shape what rates and terms are available
- Regulation in 2026 has added meaningful costs and obligations for BTL landlords specifically
Both markets are active in 2026, with products available across fixed, variable, and tracker structures. A specialist mortgage broker with access to the wider lending market will consistently find better terms than approaching a single lender directly.
Frequently Asked Questions
1. Can I use a buy to let mortgage for a commercial property?
No. Buy to let mortgages only cover residential properties rented to private tenants. A commercial property such as an office, retail unit, or warehouse requires a commercial mortgage or a semi commercial mortgage if the building has mixed use.
2. What deposit do I need for a commercial mortgage vs a buy to let mortgage?
Commercial mortgages typically require a deposit of 30 to 40% of the property value. Buy to let mortgages usually require 25%, though some lenders accept 20% depending on the property and borrower profile.
3. Are commercial mortgage rates higher than buy to let rates?
Yes. Commercial mortgage rates in the UK range from 5.5% to 9% in 2026, while average buy to let fixed rates sit between 4% and 5.75%. Commercial properties carry higher lender risk, which pushes rates above residential equivalents.
4. Can I get a commercial mortgage through a limited company?
Yes. Limited companies are a common and often tax efficient structure for commercial mortgage applications. Companies retain full mortgage interest deductibility and pay corporation tax rather than income tax, which benefits higher rate taxpayers significantly.
5. How does Section 24 affect buy to let mortgage holders?
Section 24 restricts individual landlords from deducting mortgage interest as a business expense. Instead, they receive a 20% tax credit regardless of their tax band. Higher and additional rate taxpayers pay more tax as a result, which has pushed many landlords toward limited company structures.
6. What is a semi commercial mortgage?
A semi commercial mortgage covers properties that combine residential and commercial space, such as a shop with a flat above. Lenders treat these as commercial rather than residential, so standard BTL criteria do not apply. Rates for semi commercial products in 2026 start from around 6.55% at 75% LTV.
7. Which mortgage is better for a property investor in 2026?
It depends on the property type and the investor’s tax position. BTL mortgages suit residential landlords seeking lower rates and simpler criteria. Commercial mortgages suit investors buying business premises, mixed use buildings, or larger portfolios. Limited company structures benefit both routes from a tax efficiency standpoint in 2026.
