Guide · Commercial
Commercial Property Loans vs Home Loans: What Actually Changes
If your only experience of borrowing is a home loan, commercial lending feels like a different sport. Same idea, different rules. Here is what genuinely changes, and which of those changes will affect your deal the most.
People often come to me assuming a commercial loan is a home loan with a warehouse attached. It isn't. A home loan is a heavily regulated, heavily standardised product where the lender is mostly assessing you. A commercial loan is a negotiated credit facility where the lender is assessing the property's income, the tenant, your business and you, roughly in that order. That shift explains almost every difference below.
You need a bigger deposit, and the number moves
On a home loan there is a well-known ladder: put in less, pay lenders mortgage insurance, done. Commercial lending has no equivalent safety net, so lenders simply lend a smaller share of the value and expect you to fund the rest. Plan on a materially larger deposit than you would for a house.
What surprises people is that the figure is not fixed. The same lender will go further on a plain office suite or an industrial unit in a good area than on a childcare centre, a service station or a rural shed, because the more specialised the building, the fewer buyers there are if it ever has to be sold. Location, lease strength and property type all pull the number around before anyone looks at your income.
The loan term is shorter than you expect
Thirty-year terms are a residential thing. Commercial loans commonly run over a shorter period, and that alone lifts the repayment even if the interest rate is identical. It is the single most common miscalculation I see: someone models the deal on a home loan term, the numbers look comfortable, and then the actual repayment schedule lands and the property is suddenly tighter than the rent covers. Model the repayment on the real term before you sign anything.
The valuation follows the income, not the street
A residential valuer looks at what similar homes down the road sold for. A commercial valuer starts with what the property earns. Net rent, capitalised at a rate the valuer judges appropriate for that asset class and location, is the core of the answer. Comparable sales still matter, but income leads.
The practical consequence is that the lease drives the valuation, and the valuation drives your deposit. A property with a weak or nearly expired lease can value below the price you agreed, which means you fund the difference in cash. This is why I ask for the lease before almost anything else, and why I cover it properly in the lease types guide.
The loan is reviewed. Home loans mostly aren't.
Plenty of commercial facilities carry an annual review, and many carry covenants: conditions you have to keep meeting, such as a minimum ratio of loan to value, or of income to repayments. If the property is revalued lower, or the business trades poorly, or the anchor tenant leaves, the lender can ask you to reduce the debt or reprice the facility. Nothing has to have gone wrong with your repayments for that to happen.
This is not a reason to avoid commercial property. It is a reason to read the covenants in the letter of offer rather than skimming to the rate, and to keep some headroom rather than borrowing to the absolute maximum on day one.
Pricing is negotiated, not advertised
There is no comparison table for commercial lending in the way there is for home loans. Pricing is risk-based and set deal by deal, off the property type, the lease, the borrower and how much the lender wants that business this quarter. Fee structures also differ from residential, and can include establishment fees, ongoing line or facility fees and annual review fees. Two lenders can quote the same headline rate and produce quite different total costs, so compare the whole facility, not one number. You can see how residential pricing works on the rates page, but treat commercial as its own conversation.
Commercial lending usually sits outside consumer credit protections
Loans for business or investment purposes generally fall outside the consumer credit rules that cover home loans, so the hardship and disclosure protections you may be used to work differently. The documents are also more heavily negotiated and often include personal guarantees. Have a commercial solicitor read the loan documents and the contract of sale. That is not a formality on these deals.
Where a broker earns their keep here
On a home loan, most of the value is in price. On a commercial deal, most of the value is in matching the property and the story to a lender whose credit appetite actually fits it. Lenders quietly love and quietly avoid particular asset classes, and that appetite shifts. Getting the right one first time saves weeks and a declined application on your file.
None of this makes commercial property harder to buy, just different to prepare for. If you are buying premises to run your own business from, the assessment leans on your trading numbers and I cover that in buying your business premises. If you want the full picture of what to have in the bank, start with deposit and costs. This is general information only and not credit advice, because the right structure depends entirely on your situation.
Looking at a commercial property?
Send me the property, the lease and your last two years of financials and I will tell you what deposit and structure to plan for.
Frequently asked questions
How is a commercial property loan different from a home loan?
The deposit is larger, the loan term is usually shorter, the valuation is driven by the property's income rather than nearby sales, and the facility is often subject to annual reviews and covenants. Pricing is also negotiated deal by deal rather than advertised. Business and investment lending generally sits outside consumer credit protections too.
Why do commercial loans have shorter terms?
Lenders view commercial property as a business asset with more variable income than an owner-occupied home, so they amortise the debt faster. The practical effect is a higher repayment for the same loan size, which is why you should model the numbers on the real term rather than assuming thirty years.
Can I use equity in my home to buy commercial property?
Often, yes. Using residential equity to cover part of the deposit is common, and it can change which lenders will look at the deal. It also puts your home into the security structure, so it needs to be a considered decision rather than a default one. Worth talking through properly first.
Not ready to apply?
Ask a question instead.
Leave your name and number and we’ll call you back to answer it. No application, no calendar booking, no cost.
Important information
This information is general in nature and does not take your personal objectives, financial situation, or needs into account. It is not credit assistance or a recommendation to enter into any particular credit contract. Consider whether it is right for you and seek advice before acting. Lending is subject to a lender's eligibility and approval criteria. Terms, conditions, fees, and charges apply.
Greenwood Finance · ABN 23 671 049 693 · Credit Representative No. 551942.
Ready to talk to a real broker?
Book a free 15-minute call with Victor. No fees, no obligation, no jargon.