If you plan to purchase a care home, you may be assessing your mortgage options. This guide outlines the main forms of care home finance available in the UK and explains how to secure the most suitable arrangement for your business.
Can you get a care home mortgage?
Care home mortgages are not a standalone product. However, if you plan to purchase a care home, some lenders will consider a commercial mortgage for this purpose. As a business facility, commercial mortgages usually cost more than standard residential mortgages, but there is a broad range of options for borrowers seeking this type of loan.
Lenders that support care home purchases apply sector-specific criteria. Strong preparation is essential: you will be expected to demonstrate operational competence and full regulatory compliance within the UK care home industry, as well as the usual affordability and creditworthiness that mortgage providers assess.
A commercial mortgage is not the only form of care home finance. An experienced mortgage broker in this sector can help you review all available funding routes and connect you with specialist lenders active in this niche.
How to get funding to buy a care home
If you plan to obtain funding to open a care home in the UK, there are several routes to consider. The most suitable form of finance will depend on your business position and whether you intend to purchase or remortgage an existing care home, convert a building for care use, or construct a new facility.
Below are common types of commercial finance for care homes:
Commercial mortgage
Some lenders offer commercial mortgages specifically for buying a care home. This is often the most appropriate option when purchasing an operating care home or remortgaging your current site. Many commercial mortgage providers are flexible about use of funds, so it may be possible to include renovation costs within a standard commercial mortgage.
Bridging loan
A bridging loan is short-term finance used to complete a quick purchase or to provide temporary funds until you release equity from other assets. For example, you might buy a new care home before completing the sale of another business asset intended to fund it. Bridging finance can be arranged rapidly—useful for auction purchases—but typically carries higher rates than a commercial mortgage. You will need a clear exit strategy, such as selling an asset or refinancing onto a commercial mortgage once possible.
Development finance
Development finance suits ground-up construction and major refurbishments. Funds are drawn down in stages to match the build phases, so you pay interest only on money released to date. This can reduce interest costs during the project compared with borrowing the full loan amount from day one. Like bridging loans, development finance is short term and requires an exit, typically a commercial mortgage or sale of the completed care home.
Remortgaging to release equity
If you already own a care home and want to expand—or add another site to your portfolio—you may be able to remortgage to release equity from an existing property. Many businesses use released equity as a deposit for a new purchase, and in some cases to fund the entire project.
What requirements do you need to satisfy?
Regardless of the finance you use to purchase a care home, lenders apply similar sector-specific checks. Alongside standard assessments of affordability and creditworthiness, their priority is your ability to run a profitable, well-regulated care home.
Lenders will typically expect you to meet the following:
Industry experience
Most lenders look for at least two to three years’ experience operating a care home—either as an owner or in a senior management role. You will usually need to evidence suitable qualifications for yourself and key managers, commonly a minimum NVQ Level 4 in Care.
Success and reputation
When purchasing an existing care home, lenders generally want at least two years’ trading records and a CQC (Care Quality Commission) rating of “Good” or better.
Minimum occupancy rates
Some lenders set minimum occupancy requirements—often up to 90% over a defined period. They may also require a minimum capacity for the property itself. A threshold of around 26 beds is common, though some lenders may insist on more.
Regulatory compliance
As a highly regulated sector, you must demonstrate full compliance on health and safety, staff qualifications, required insurance policies and CQC standards. Have all certificates and documents ready at application.
Business plan
Expect to provide a detailed business plan with financial forecasts, target occupancy and a clear marketing strategy. If you are taking over an existing operation, include historic performance and explain how you will maintain or improve results.
Deposit
Deposit levels vary by funding type, but you will often need between 20% and 40% of the property value for this kind of commercial loan. Existing assets can sometimes be used instead of a cash deposit, subject to the lender’s criteria.
As with any property finance, higher perceived risk usually means a larger deposit. For example, care homes with an “Outstanding” CQC rating may secure a higher LTV than those rated “Good”.
Who are the main care home mortgage lenders and what are typical rates?
A growing number of high street mortgage providers are now open to care home applications for commercial mortgages—with lenders such as HSBC and Barclays sometimes accommodating this type of loan.
That said, most finance in this space is delivered by smaller banks and specialist lenders, some of whom focus exclusively on funding care facilities. Examples include:
Atom Bank
May consider applicants with fewer than two years’ experience where all of the following apply:
- CQC rating of Good or Outstanding
- Maximum LTV of 70%
- Care home manager holds NVQ Level 4 and has at least two years’ experience
- Minimum 90% occupancy achieved over the last six months
- Able to provide a personal guarantee of at least 10% and meet a 145% stress test
Allica Bank
Offers commercial mortgages for care home purchases from £500,000 to £10 million for experienced operators, and potentially up to £5 million for first-time operators who meet the required criteria.
Triodos Bank
Provides care home finance up to £20 million with a 70% LTV.
OakNorth
Specialises in care home lending and structures loans on a bespoke basis.
Access to these lenders is typically via a mortgage broker. Contact us to discuss your circumstances and the finance options available.
Frequently Asked Questions
Securing a care home mortgage with no direct sector experience is typically far more challenging. That said, lenders may consider relevant experience from a closely related industry if you plan to move into the care sector.
To improve your chances of finance approval, appoint a management team with strong, proven credentials in care. Be aware you may face higher interest rates and may be asked for a larger deposit in these circumstances.