Care Home Mortgages

Yes, getting a mortgage for a care home is possible, depending on the type of purchase you want to make. Most mortgage providers in the UK will offer residential mortgages, but commercial mortgages can be harder to get. Commercial mortgages require more information and checks than a standard residential mortgage.

Care Home Mortgages for Residency

If you’re looking to mortgage a flat in a care home, this is called a retirement mortgage. These products can be interest-only or can include payments towards the property. Depending on your age, you could struggle to get a mortgage with a long term. This is because most lenders will have maximum age where they no longer offer mortgages, due to the risk that the borrower won't be able to continue payments at some point.

There are also often higher deposit requirements for retirement mortgages compared to standard residential mortgages. Deposit requirements can be up to 45% for this type of mortgage, due to the higher risk of lending to borrowers of retirement age.

Care Home Mortgages for Commercial Purposes

A commercial mortgage covers any type of building you want to buy for commercial purposes. Commercial mortgages usually last for 5 to 25 years, though there are some exceptions. More lenders have started offering commercial mortgages for care homes, but it can still be hard to find the best deal for your mortgage.

Commercial mortgages vary from residential mortgages in a range of ways. Most notably, you’ll often find that it’s harder to find a commercial mortgage with a fixed interest rate. Interest rates will also often be higher than for residential properties due to the higher risks inherent with business mortgages. However, you’ll often find that the interest rates are lower compared to business loans. This is because the property can act as security for a commercial mortgage whereas business loans do not have this same collateral.

Most commercial mortgages require a larger deposit than standard residential mortgages. Typically, the minimum deposit for care home mortgages is between 20% and 40%. The better the profit projections of the care home, and the better you meet the other criteria, the lower you can expect your maximum deposit to be. On the other hand, if you’re looking at buying a care home with poor occupancy rates, ratings, or short trading history, you may have to pay a higher deposit.

Your credit history and the history of your other business ventures can also factor into the deposit size. If you’re considered less of a risk to the lender, the deposit size required can be lower than average.

Getting a mortgage for a care home can take longer than for a standard residential property. This is due to the additional checks that need to be done, such as checking your business plan, the records of profits from the care home, qualifications of the management, and more. It could take anywhere between three and seven months to get a mortgage approved for a care home. It’ll be quicker if you have a proven record of other care home purchases that have been fully repaid. If it’s your first care home mortgage, the process could take longer.

There are several things that can make it more difficult to get a mortgage for a care home. For example:

Bad Credit History

If you have a poor credit history, you’ll often find that it’s harder to get any type of mortgage. This can particularly be a problem if you have defaulted on similar mortgages in the past.

Lack of Experience

If you have no experience in running a similar business, some mortgage lenders might not want to risk accepting your application. You can get around this with additional preparation and by getting the help of people with more experience. Even if you have experience in another field of business, lenders may not be willing to accept this, as care homes are a very specific type of business.

Low Affordability

Mortgage affordability for commercial properties is typically based on the projected profits of the business. This will usually need to be if you’re struggling to get a care home mortgage due to the above, one of our experienced brokers can support you to find specialise lenders that can help.

Care home mortgage lenders require you to have adequate insurance for the care home. This could include insurance for the building, business, and liability. This is to make sure that your business cannot go bankrupt due to unforeseen circumstances, as this presents a large risk to lenders.

Commercial mortgages are less readily available than residential mortgages and there are additional requirements in place for these. This can make it harder to find the right mortgage for your needs. As an experienced mortgage broker, we can get you access to specialist lenders, who may not advertise to members of the public directly.

Getting a commercial mortgage to run a care home requires a very thorough plan for how you intend to run the care home business. You’ll need to show that you or your staff have the appropriate qualifications and experience to make sure that the business will be profitable. Getting a mortgage for a care home with low occupancy, low ratings, or other problems can be more challenging, but there are specialist lenders who can help with this.

Here at John Charcol, we have expert brokers with experience in commercial mortgages for care homes. We can help you get access to a wider pool of lenders, making sure that you can get an application accepted. Get in touch today to see how our expertise can start you on your venture into buying a care home.