When a dentist buys a practice that comes with its own building, two very different pieces of borrowing are usually at work. One funds the business, the goodwill and equipment, and is priced on the strength of the practice's earnings. The other funds the bricks and mortar, the freehold surgery itself, and is secured on that property. This guide is about the second one: the commercial mortgage. It is a distinct product with its own loan-to-value, term, rate structure and security, and treating it as just another slice of the acquisition loan is a common and expensive mistake.
We stay strictly in the lending lane here. This is how the freehold is funded, not a guide to the tax of owning it. The holding-structure question, personal name, company or pension, and the interest-deductibility position are summarised in a sentence or two and cross-linked to the detailed tax guides, because they belong to a different layer of the decision. What follows is the mechanics: how much you can borrow, over what term, at what kind of rate, on what security, and how the surgery gets valued.
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What a dental commercial mortgage is, and is not
A dental commercial mortgage is a secured loan used by a dental business to buy the freehold premises it trades from. The lender takes a legal charge over the building, advances a proportion of its value, and is repaid over a long term from the practice's income. Because it is borrowing by a business for a business purpose, it is commercial lending, not consumer lending. It is not a residential mortgage, not a buy-to-let, and not a personal loan. Those are separately regulated consumer products with statutory protections that do not apply here, and conflating them leads to the wrong expectations on both cost and flexibility.
The defining feature is that the loan is owner-occupier finance: you are borrowing to buy premises your own practice will occupy and operate from, not to buy a property to let to an unconnected tenant as an investment. That owner-occupier status matters to lenders, because the same income that services the mortgage is the income they can see and underwrite. It also shapes how the building is valued, which we come to below. Under the FCA Perimeter Guidance, lending to a business for the purposes of that business sits outside the consumer mortgage regime, which is why the terms are negotiated case by case rather than set by a standard consumer framework.
Freehold versus leasehold: when a commercial mortgage is even in play
A commercial mortgage only arises where there is a freehold, or a long leasehold, to buy. Many dental practices trade from rented premises on a commercial lease, in which case there is no property to mortgage and the funding conversation is about goodwill, equipment and working capital instead. The choice between renting and owning the premises is a strategic decision in its own right, with cash-flow, flexibility and long-term-wealth implications, and we cover that decision in full in our guide to the lease versus freehold purchase. That page is the decision; this page is the product you use once you have decided to buy.
The short version: buying the freehold turns rent into mortgage repayments that build an asset you own, and it removes the risk of a landlord not renewing a lease that your patient base is tied to. Against that, it needs a deposit, ties up capital, and puts the property-market risk on you. Where the freehold is available and the numbers work, owning the building is often the stronger long-term position for a practice owner, which is precisely why the commercial mortgage is worth understanding properly.
How much you can borrow: LTV and the covenant
Two things set the size of the loan: the loan-to-value (LTV) the lender will offer against the building, and the affordability, whether the practice's earnings comfortably cover the repayments.
On an owner-occupied dental surgery, LTV commonly sits around 70 to 80 percent of the property value, so you provide 20 to 30 percent as deposit or equity. Dentists frequently achieve the upper end, and sometimes more, because lenders treat the practice income servicing the loan as resilient. That resilience comes from the profession itself: GDC registration, steady demand, and, where relevant, income partly underpinned by an NHS contract. The property is the security, but the covenant, the earnings behind the borrower, is what gives the lender comfort to lend at a high LTV against it.
Affordability is measured through debt-service cover: the practice's adjusted earnings (broadly EBITDA, earnings before interest, tax, depreciation and amortisation) divided by the annual loan cost. Lenders typically want cover comfortably above 1.25 times, meaning earnings exceed the repayments with a margin. A profitable practice buying a modestly geared freehold clears this easily; a highly geared purchase against thin earnings does not. This is why the same building can support a bigger loan for one buyer than another.
A worked example: a 400,000 pound freehold surgery
The following is an illustrative example, not a quote, to show how the pieces fit. Take a practice buying its freehold surgery, valued at 400,000 pounds, on a commercial mortgage.
| Element | At 70% LTV | At 80% LTV |
|---|---|---|
| Property valuation | 400,000 | 400,000 |
| Loan advanced | 280,000 | 320,000 |
| Deposit / equity required | 120,000 | 80,000 |
| Indicative term | 20 years | 20 years |
| Illustrative rate (Bank Rate + margin) | ~7.0% | ~7.25% |
| Approx. monthly repayment (capital & interest) | ~2,170 | ~2,530 |
| Approx. annual loan cost | ~26,050 | ~30,320 |
| Debt-service cover if practice EBITDA is 45,000 | ~1.73x | ~1.48x |
The lower-LTV option needs a bigger deposit but costs less each month and gives stronger cover; the higher-LTV option preserves your cash for working capital or equipment at the price of a slightly higher rate and tighter cover. Neither is automatically right. Which one you should take depends on how much cash you can commit, how you value keeping a buffer, and where the lender's pricing actually lands, which is a live-market question rather than a rule of thumb. The figures above move with Bank Rate and with each lender's margin, so treat them as a shape, not a price.
Term, rate structure and what drives the margin
Commercial mortgages on a surgery commonly run 15 to 20 years, occasionally to 25, longer than a typical goodwill loan because the security is a tangible, durable asset. A longer term lowers the monthly cost and strengthens debt-service cover, but increases the total interest paid over the life of the loan, so it is a trade between monthly affordability and lifetime cost. Many owners align the term with how long they intend to keep working in the practice.
The rate is usually structured as a margin over a reference rate, most often the Bank of England Base Rate, sometimes a fixed rate for an initial period before reverting to a variable margin. What drives the margin is a blend of factors: the LTV (a lower LTV is less risk, so a keener margin), the strength and predictability of the practice's earnings, your experience and track record, the quality and location of the building, and the prevailing market. A well-established practice buying a modestly geared, purpose-built surgery in a good location will see a sharper margin than a first-time buyer stretching to a high LTV on an awkward conversion. Because these variables interact, two lenders can price the same deal quite differently, which is the single biggest reason to compare the market rather than accept one bank's offer.
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Security: the legal charge, debenture and personal guarantees
The primary security is a first legal charge over the freehold property, the mortgage itself, giving the lender the right to recover the debt from the building if repayments fail. Beyond that, where the borrower is a limited company the lender will normally also take a debenture (a charge over the company's assets and undertaking) and one or more personal guarantees from the directors.
Personal guarantees are the point most buyers focus on, rightly. A guarantee means that if the company cannot pay and the property sale does not cover the debt, the lender can pursue you personally. The important nuances are that a guarantee is often capped at a proportion of the loan rather than unlimited, that it sits behind the property charge (the building is sold first), and that its scope is negotiable. A broker who runs dental deals regularly can frequently narrow the cap or the scope from the lender's opening draft. Treat the first version you are shown as a starting position, and take legal advice on any guarantee before you sign it.
How lenders value a dental surgery
The loan is sized against the valuation, not the price you agreed, and a purpose-fitted dental surgery can be valued on more than one basis. A commercial valuer will typically weigh the bricks-and-mortar value (what the building is worth as premises in its location, stripped of the business) against the going-concern or investment value (what it is worth as a building let to a paying dental tenant). A well-located surgery fitted out for dentistry may be worth more as a going concern than as an empty shell, but lenders tend to lend against the more cautious of the applicable figures to protect themselves against a forced sale.
The practical consequence is simple and worth stating plainly: the valuation, not your agreed purchase price, sets your real LTV and therefore your deposit. If the valuation comes in below the price, your deposit rises to bridge the gap. Order the valuation early in the process so any shortfall surfaces before you are committed, rather than days before completion. It is also why a building that is highly specialised, in a weak location, or hard to repurpose can attract a lower LTV: the lender is thinking about what it could sell the property for if things went wrong.
Holding the freehold: personally, in the company, or in a pension
Where the mortgage is the lending question, who owns the building is the structuring question, and it is a tax and estate decision rather than a finance one. We keep it brief here by design and point you to the detailed guidance. There are broadly three routes. Holding the freehold personally and charging the company rent keeps the asset outside the trading company, which can simplify a future business sale, though the rent is taxable income in your hands and can affect Business Asset Disposal Relief (18 percent from 6 April 2026) on an eventual disposal. Holding it inside the company keeps the costs within the trade but ties the asset to the business. Holding it in a SSAS or SIPP pension can be tax-efficient, because commercial property is an allowable pension investment, the practice pays deductible rent to the pension, and growth sits in a tax-favoured wrapper.
Each route has real and lasting consequences, and unwinding the wrong one later is expensive. The interest on the mortgage is generally an allowable finance cost where the premises are used wholly for the trade, as HMRC sets out in its guidance on interest and finance costs, and the capital and fit-out elements interact with the capital allowances rules, but those are the tax layer, not the lending layer. For the full structuring analysis, including how the holding decision plays into profit extraction and a future exit, see our guide to profit extraction and practice structure, and take specialist advice before you fix the structure.
The application, and what a broker adds
The application runs alongside the wider purchase. A lender will want the practice accounts and earnings (to prove affordability), a valuation of the building, your experience and credit profile, and confirmation that the regulatory position is in order, including CQC provider registration and, for NHS work, the contract arrangements. The mortgage is typically offered subject to conditions, with drawdown and completion conditional on the property and regulatory pieces being satisfied. Sequencing these so the finance timeline and the regulatory timeline move together, rather than one waiting on the other, is what keeps a completion on track.
What a specialist broker adds is not just access to more lenders but knowing which lender prices a dentist's freehold keenly, which will stretch the LTV, and which will negotiate the personal guarantee. Because the same deal is priced differently across the market, and because the professional-category treatment of dentists is not applied uniformly, matching your profile to the right lender materially changes the LTV, the rate and the security you end up with. This is the money page for the premises; the wider funding of the goodwill and equipment is covered in our guide to financing a practice acquisition, and where the deal needs no cash deposit at all, in our guide to 100 percent dental practice finance. If you already own premises and want to review the rate or release equity, see refinancing a dental practice loan, and if you are funding a second site, second-practice expansion finance. Every stage of the purchase sits on our pillar guide to how to buy a dental practice.
The bottom line
A commercial mortgage is the right tool for the right job: funding the building your practice trades from, secured on that building, over a long term, at a rate that reflects the LTV and the strength of your earnings. Keep it distinct from the goodwill and equipment lending that funds the business itself, order the valuation early because it, not your price, sets the deposit, and treat the personal guarantee and the holding structure as things to negotiate and plan, not accept by default. Get the lending and the ownership decisions right at the outset, take advice on the tax structure separately, and the freehold becomes one of the strongest long-term assets a practice owner can build.