How much deposit do you need to buy a care home
The deposit is the first number most buyers want. This guide explains the typical 25 to 30 percent contribution, why it sits there, and what can move it up or down.
To buy a trading care home you typically need a deposit of 25 to 30 percent of the value, because lenders advance up to about 70 to 75 percent of going-concern value on a commercial mortgage. A stronger operator covenant, a Good or Outstanding CQC rating and a healthy EBITDARM margin can support a lower deposit at the top of that range, while a weaker profile or a repositioning home requires more equity. These are indicative figures, not an offer of credit.
At a glance
- Typical deposit25 to 30% of value
- Typical loan to value70 to 75%
- Lower deposit whenStrong covenant, rating and trading
- Higher deposit whenWeaker rating or repositioning
- PlusFees and working capital
The typical deposit
On a going-concern care home purchase, lenders commonly advance up to about 70 to 75 percent of value, which means a deposit of 25 to 30 percent. This is finance to buy a care home as a business, so the deposit funds the equity portion of an acquisition, not anything to do with paying care fees.
Remember that the deposit is not the only cash you need. On top of it you should budget for the arrangement fee, a specialist valuation, legal costs and a working-capital buffer for the early months of ownership.
Why lenders cap at 70 to 75 percent
Care home lending is secured against a trading business as well as a property, and the trade can move. Capping the loan at 70 to 75 percent of going-concern value gives the lender a cushion if earnings dip or the home needs investment. The cap is also set against the going-concern value rather than the higher of any figure, so a wide gap between the fully operational value and the bricks-and-mortar value tends to pull the effective leverage down.
What moves the deposit up or down
| Factor | Lower deposit | Higher deposit |
|---|---|---|
| Operator | Experienced, strong covenant | First-time buyer |
| CQC rating | Good or Outstanding | Requires Improvement or worse |
| Occupancy | High and stable | Low or volatile |
| EBITDARM margin | Healthy, above the sector average | Thin or falling |
| Property | Modern, purpose-built | Dated, shared rooms |
| Fee mix | Strong private-pay share | Heavy local-authority reliance |
As benchmarks, Knight Frank put sector occupancy at 88.7% and the average EBITDARM margin at 30.1% of income for FY2024/25. A home clearly beating those numbers, run by an experienced operator and rated Good or Outstanding, has the best chance of the keenest leverage and the smallest deposit.
Lower deposit with stronger trading
Where the trading is strong and the covenant is good, some lenders will stretch toward the top of the leverage range, reducing the deposit. This is most achievable for experienced operators buying a well-rated, well-occupied home with a healthy private-pay mix. For repositioning purchases, closed homes or weaker ratings, expect to put in more equity, because the early funding usually comes from bridging or development-style finance before a term refinance.
We size the realistic deposit for a specific home before you make an offer, by testing the trading against lender criteria with the lenders we work with, including Shawbrook, OakNorth, Allica Bank and Atom Bank. That avoids agreeing a price you cannot fund.
How much deposit do you need to buy a care home: common questions
How much deposit do I need to buy a care home?
Typically 25 to 30 percent of the value, because lenders advance up to about 70 to 75 percent of going-concern value on a commercial mortgage. Plan for fees and working capital on top of the deposit. These are indicative figures, not an offer.
Can I buy a care home with a smaller deposit?
Sometimes. A strong operator covenant, a Good or Outstanding CQC rating, high stable occupancy and a healthy EBITDARM margin can push leverage toward the top of the range, reducing the deposit. A weaker profile requires more equity.
Why is the deposit higher for a closed or poorly rated home?
Because there is little or no current trade to lend against, so the early funding comes from higher-risk bridging or development finance that advances less. Once the home is trading and re-rated, it can be refinanced onto a term mortgage at lower leverage cost.
What else do I need besides the deposit?
An arrangement fee of about 1 to 2 percent of the loan, a specialist valuation fee, legal costs for both sides, and a working-capital buffer to cover payroll and running costs in the first months of ownership.
Funding a care home?
Send us the home and the operator and we will come back with a view on fundability and likely terms within one working day.