Key Takeaways
- Commercial property LVRs typically range from 65-80% depending on property type and tenant quality
- Interest rates are typically 0.5-1.5% higher than residential loans
- Rental income assessment varies significantly between lenders
- Owner-occupiers may access better rates and higher LVRs than investors
- Loan terms typically 15-25 years with 5-year rate reviews
- Specialist lenders can fund properties major banks decline
Commercial property finance covers loans for offices, retail shops, industrial units, warehouses, and mixed-use properties. Whether you're purchasing premises for your own business or investing for rental income, understanding how commercial lending differs from residential is essential.
At Mortgage & Finance Advisory, we help clients across Victoria secure commercial property finance for investments and business premises. With access to major banks, non-bank lenders, and specialist commercial financiers, we find solutions for straightforward and complex scenarios alike.
Types of Commercial Property Finance
Owner-Occupier Finance
For businesses purchasing their own premises. Lenders assess both the property's value and your business's ability to service the loan. Often attracts better rates than investment lending as the owner has strong motivation to maintain payments.
Commercial Investment Loans
For purchasing commercial property as an investment. Assessment focuses heavily on rental income, tenant quality, and lease terms. See our investment loan strategies guide for portfolio building tips.
SMSF Commercial Property
Self-managed super funds can purchase commercial property, including premises leased to your own business. Special rules apply - see our SMSF property guide.
| Property Type | Typical LVR | Rate Premium | Key Considerations |
|---|---|---|---|
| Office | 65-75% | +0.5-1.0% | Tenant quality, lease length |
| Retail | 60-70% | +0.75-1.25% | Location, foot traffic |
| Industrial | 65-75% | +0.5-1.0% | Contamination, specialisation |
| Medical/Childcare | 70-80% | +0.25-0.75% | Often favoured by lenders |
What Lenders Assess
Property Factors
- Location: CBD, metro, regional all assessed differently
- Tenant quality: National tenants vs local businesses
- Lease terms: Remaining lease, options, rent reviews
- Property condition: Age, maintenance, special features
- Environmental: Contamination risk for industrial sites
Borrower Factors
- Business financials: For owner-occupiers, business strength matters
- Personal assets: Directors typically provide personal guarantees
- Experience: Commercial property experience helps
- Exit strategy: How will the loan ultimately be repaid
Rental Assessment: Lenders typically shade commercial rental income by 20-40%, meaning they only count 60-80% of the rent when assessing serviceability. This is more conservative than residential investment lending. Use our Commercial Loan Calculator to estimate borrowing capacity.
Client Success Story
A Geelong medical practice secured 80% LVR funding for their new premises when major banks offered only 65%. By using a specialist commercial lender that favours medical properties, we achieved better LVR and competitive rates, reducing the cash required by over $150,000.
Frequently Asked Questions
Commercial property LVRs typically range from 65-80% depending on property type, location, tenant quality, and your financial position. Owner-occupiers may access higher LVRs than investors. Specialist properties like medical centres and childcare facilities often attract better terms.
Yes, commercial rates are typically 0.5-1.5% higher than residential rates. This reflects the higher risk profile of commercial lending. However, rates vary significantly between lenders and property types.
Yes, interest-only periods of 1-5 years are commonly available for commercial property, particularly for investors. Some lenders offer longer IO periods for strong applicants.
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