Care home mortgages and purchase finance

Who can borrow and what lenders look for

Lenders lend to operators and investors buying a care home as a business. They expect a credible operator covenant, which for a first-time buyer usually means an experienced registered manager and a clear business plan, and for an established group means a track record across existing homes. The CQC rating matters: a Good or Outstanding home is straightforward, while a Requires Improvement or Inadequate rating is lendable but needs a clear remediation plan and tends to mean a lower loan to value. Lenders examine occupancy, the split between private and local-authority fees, staff costs and agency reliance, and the local market. For an investment purchase let to an operator, the focus shifts to the strength of the lease, the rent cover and the tenant covenant. We package the case to put your strengths in front of the right lender and to explain any weaknesses before they become a problem.

How much you can borrow

On a purchase, most lenders advance up to 70 to 75 percent of the going-concern value, and occasionally more where the operator covenant is strong and the home trades well. The binding constraint is usually interest cover rather than loan to value: lenders size the loan so that EBITDARM, the trading profit before rent, interest, tax, depreciation, amortisation and management charges, covers the debt service with headroom, often around 1.4 to 1.5 times. A home with high, stable occupancy and a strong private-fee mix supports more debt than a home with the same property value but weaker trading. Margins across the sector are healthy: Knight Frank reported an average EBITDARM margin of 30.1 percent of income in FY2024/25, with nursing homes at 31.1 percent. We model the achievable loan from the accounts before we approach lenders, so the figure we quote is grounded in the home's actual trading.

Rates and costs

Care home commercial mortgage rates are indicatively from around 7 to 9 percent, quoted either as a fixed rate or as a margin over the Bank of England base rate or SONIA, with the exact rate set by the operator covenant, the CQC rating, the loan to value and the term. Expect a lender arrangement fee, usually around 1 to 2 percent of the loan, a valuation fee for the going-concern report, and legal costs for both sides. A monitoring or trading review may apply on larger or weaker covenants. Our broker fee is disclosed in writing up front and we never claim an exclusive tie to any lender. We compare the total cost of the deal across the market, because the lowest headline rate is not always the cheapest facility once fees and terms are counted.

Purchase finance, bridging or development finance

Purchase finance is the right product when you are buying a trading home that you intend to hold and run, or let, for the long term. If you need to move faster than a term lender can, for an auction or a competitive purchase, or the home is not yet trading or CQC-registered, care home bridging finance is the better fit and is later refinanced onto a term mortgage once the home stabilises. If you are building a new home or carrying out a major extension or conversion, development finance funds the build to a stabilised exit. Many operators use these products in sequence: bridge to buy, develop or reposition, then refinance onto a long-term commercial mortgage. We map the route across all three so you are not paying short-term money for longer than you need to.