Pub Mortgages

Buying a pub starts with finding the right location and deciding on the type of venue you want to run. Arranging suitable finance is another essential part of turning that ambition into reality.

This guide explains how to get a mortgage to purchase a pub and how the right broker can help you find a finance option that suits your plans and circumstances.

Can you use a mortgage to buy a pub?

Yes, you can use a mortgage to purchase a pub. The most suitable option will depend on how the property is used, including whether it contains private living accommodation or rooms for paying guests.

A pub with an owner’s residence may require a semi-commercial mortgage. Where accommodation is used for overnight guests, a commercial mortgage suitable for a hospitality business may be more appropriate.

Commercial mortgages generally fall outside FCA regulation. However, borrowing secured against a property that includes the borrower’s or their family’s home may be regulated, depending on the residential proportion and the circumstances of the arrangement.

For unregulated lending, lenders have greater flexibility in how they assess affordability, although you will still need to demonstrate that the repayments are sustainable.

How much can you borrow?

The amount you can borrow will depend on several factors, including your deposit and whether you can offer additional assets as security. Commercial finance is assessed individually, with lenders considering your circumstances and the risk associated with the purchase.

You’ll also need to meet the lender’s eligibility requirements, which will influence the loan available. As a guide, borrowing may cover up to 70% of the purchase price, while applications considered higher risk may be limited to around 50%.

When assessing affordability, your lender will review the pub’s projected earnings before interest, taxes, depreciation, and amortisation (EBITDA) to ensure your operating profit is healthy and sustainable enough to cover the mortgage payments.

Eligibility criteria

Lenders typically consider the following when assessing a mortgage application to purchase a pub:

• Experience – Many lenders prefer applicants with at least two to three years’ experience running a pub, either as an owner or as a manager for another business.
• Deposit – You may need a deposit of around 30–45%, depending on the lender, your circumstances and the business. Deposit requirements can be higher than for some other commercial properties because of the risks associated with the pub industry.
• Financial position and credit history – Lenders assess the business’s finances and credit record, alongside those of its directors. Stronger applications generally attract more competitive rates, although commercial mortgages with adverse credit may be available on a case-by-case basis.
• Business plan – A clear, realistic plan should explain your business goals, relevant experience, projected profits and how you intend to cover the mortgage repayments.
• Licensing requirements – You should establish which licences and permissions are needed to operate the pub and how these will be obtained or transferred. Lenders may require evidence that suitable arrangements are in place.
• Property and trading history – The pub’s location, condition and freehold or leasehold status can affect its value and suitability as security. Lenders may also review previous trading accounts, the establishment’s reputation and demand in the local area.

How to get a pub mortgage

Arranging a commercial mortgage for a pub can be complex, particularly where the property has several uses. A broker with experience in pub finance can help you understand lenders’ requirements and prepare your application.

Contact Money Helpdesk below to explore suitable commercial finance options for your pub purchase.

Available lenders and rates

Fewer commercial lenders offer mortgages for pubs than for some other business premises, reflecting the risks associated with the sector. High street options may be limited, but specialist lenders can provide finance for pub purchases and remortgages.

Commercial mortgage rates are usually quoted individually to reflect the application. They are generally higher than residential mortgage rates, with pricing influenced by the loan-to-value (LTV), the strength of the business and your experience in the pub industry.

A broker can assess your circumstances and help you understand the rates that may be available.

Things to consider

Running a pub involves practical and legal considerations that can affect its commercial viability and your ability to secure finance.

Licensing

You’ll need the appropriate licences and permissions to operate the pub. Depending on its location and your role, these may include a premises licence and a personal licence. Gaming machines may also require local authority notification or a permit.

Check that the premises licence supports your plans, including opening hours, alcohol sales and any entertainment requiring authorisation. An existing licence may contain conditions that affect how you run the business. Changes can require approval, so you should establish what is permitted before committing to the purchase.

Leasehold or freehold

The choice between leasehold and freehold ownership affects your costs, control over the business and future sale options.

With a leasehold pub, you purchase the right to occupy and operate the premises for the remaining lease term. Review the rent, renewal provisions, maintenance obligations and any trading restrictions. Some pubs have supply ties that require certain drinks to be purchased from a particular brewery or supplier.

Purchasing the freehold gives you ownership of the property and generally greater control, although the initial cost is usually higher. Freehold ownership does not automatically mean the pub is free from brewery ties or other restrictions, so these should still be checked.

Frequently Asked Questions