Commercial mortgages differ from residential ones in a way that catches owners out. They are written for a fixed term — often five years — and at the end of that term the balance is repayable. There is no automatic right to continue, and no equivalent of rolling onto a standard variable rate indefinitely.
Most of the time this is a formality and the lender renews. When they decline, the position becomes urgent quickly, because a balance that was comfortably serviced yesterday is now due in full.
Why Lenders Decline Perfectly Sound Cases
It is worth understanding that a refusal to renew frequently has nothing to do with your conduct as a borrower. Payments may have been made without fail for the entire term.
Banks periodically reduce their exposure to particular sectors. Retail and hospitality have both been through such cycles, and a lender withdrawing from a sector will decline renewals across the board regardless of individual performance.
Valuations move. If the property has fallen in value, the loan-to-value on renewal may exceed the lender’s current appetite even though nothing about your position has changed.
Criteria tighten. A loan written five years ago may not meet the same lender’s rules today — a common experience for owners of mixed-use property, or buildings with an unusual tenant profile.
Tenant risk changes. A single-let property whose tenant’s covenant has weakened, or a lease with a short unexpired term, looks materially different to a credit committee than it did at the outset.
What Actually Happens If You Do Nothing
The balance falls due on the term date. Where it is not repaid, the loan moves to default, and default interest — typically several percentage points above the contractual rate — begins to accrue.
From there the lender’s options include appointing a receiver over the property or pursuing recovery through the courts. Both routes tend to end in a sale conducted on the lender’s timetable rather than yours, and property sold in those circumstances rarely achieves its full value.
The gap between the bank saying no and the property being marketed by a receiver can be surprisingly short. Acting early is not caution, it is the whole game.
The Refinance Route
The straightforward solution is a new commercial mortgage from a different lender, and this is where most cases land. The commercial lending market is far broader than the clearing banks — challenger banks, specialist commercial lenders, debt funds and private lenders all operate in this space, and their criteria differ considerably.
A property that one lender considers outside appetite may be entirely ordinary to another. Sector-specific lenders in particular will often take a view on hospitality, care, or leisure assets that a generalist bank will not.
Start this at least six months before the term date. Commercial refinancing takes longer than residential — valuation, legal due diligence and credit approval on a commercial asset are all more involved, and three to four months from application to completion is normal rather than slow. Our commercial mortgages page covers criteria and typical terms, and the wider commercial property finance pillar sets out the full range of facilities available.
When There Isn’t Time to Refinance Properly
Where the term date is weeks rather than months away, a full refinance may not complete in time. The practical answer is to repay the existing lender with short-term finance, removing the default risk, and then arrange the long-term facility without a deadline hanging over it.
This costs more than going straight to a term loan, and it should be treated as a means of buying time rather than a destination. But the alternative — default interest accruing while a receiver is appointed — is considerably more expensive. Our commercial bridging finance page explains how these facilities work against commercial security.
The same approach helps where the property needs work before it will refinance well. If a vacant unit is depressing the valuation, short-term finance can cover the period required to let it, with the refinance following once income is in place and the asset presents properly.
Improving the Property’s Refinance Case
If you have time, several things measurably improve the terms available.
Lease length is the single biggest lever on an investment property. A tenant with two years remaining and a tenant with eight years remaining produce very different valuations of the same building. Where a renewal or regear is achievable before you refinance, it is usually worth the effort.
Vacancy is the second. Even partial occupancy of a multi-unit building changes the assessment substantially.
Clean, current financial information is the third and the most often neglected. Up-to-date accounts, a clear tenancy schedule and evidence of rent received make a credit paper straightforward to approve. Incomplete information invites questions, and questions cost weeks.
Where the property is owner-occupied rather than let, the assessment centres on the trading business rather than tenant covenants — a different exercise, covered on our owner-occupied commercial mortgage page. For let property held as an investment, see commercial investment mortgages.
Frequently Asked Questions
How far ahead should I start looking at refinancing?
Six months before the term date for a straightforward case, and up to twelve where the property is unusual, partly vacant, or the existing lender has already indicated they will not renew.
Can I refinance if the loan is already in default?
Often yes, though it narrows the lender pool and affects pricing. The important thing is to act rather than wait — the position deteriorates the longer default interest runs.
Will a new lender want personal guarantees?
Frequently, particularly on owner-occupied property or where the loan-to-value is higher. The extent of the guarantee is negotiable, and capped guarantees are common.
What if the property is worth less than the outstanding balance?
This is difficult but not always terminal. Options include injecting equity to reduce the loan, adding other property as security, or negotiating with the existing lender — who may prefer a managed outcome to enforcement.
If your commercial mortgage is approaching term and you are unsure whether the lender will renew, the time to look at alternatives is now rather than after they confirm. You can see the full range of commercial facilities we arrange on our homepage, or contact our team to discuss the asset and the timeline.