Owner-occupier care home mortgage

Who can borrow and what lenders look for

An owner-occupier lender is lending to the operating business, so the trading accounts sit at the centre of the case. They want a sustainable EBITDARM that covers the debt service with headroom, stable or rising occupancy, a sensible private and local-authority fee mix, controlled staff and agency costs, and a Good or Outstanding CQC rating. They also assess the operator's experience: a manager stepping up to ownership is fundable with a strong track record running the home, while an established operator brings a portfolio record. Personal guarantees and a debenture over the operating company are usual. On the regulatory side, commercial owner-occupier lending to a company is unregulated, but where any part of a proposed facility would be a regulated mortgage contract we refer that element to an authorised firm. We package the trading story and confirm the correct regulatory route before recommending a lender.

How much you can borrow

An owner-occupier mortgage runs up to around 70 to 75 percent of the going-concern value, occasionally higher where the trading is strong, and is constrained by interest cover on EBITDARM rather than by loan to value alone. Because you are the operator, the lender sizes the loan against the home's actual trading profit, so a well-occupied home with a healthy private-fee mix supports a larger loan than its bricks-and-mortar value would suggest. The valuation is carried out on a going-concern basis, which usually produces a higher figure for a well-run home than a vacant-possession valuation would. With sector EBITDARM margins around 30.1 percent of income, per Knight Frank for FY2024/25, a profitable home generates real capacity. We model the going-concern value and the affordable loan from your accounts before approaching lenders, so the figure is realistic from the outset.

Rates and costs

Owner-occupier mortgage rates are indicatively from around 7 to 9 percent, set by the trading strength, the CQC rating, the loan to value and the term, and quoted as a fixed rate or a margin over base or SONIA. Owning the freehold removes the rent you would pay under a lease, which often improves cashflow even when the mortgage costs more than rent, because the capital repayment builds your equity in the asset. Expect a lender arrangement fee of around 1 to 2 percent, a going-concern valuation, legal fees for both sides, and sometimes an annual trading review on larger facilities. We disclose our broker fee in writing, compare the whole-of-market cost, and never claim an exclusive tie to any lender, so the recommendation rests on the full numbers and the correct regulatory route.

Owning the freehold or leasing the home

An owner-occupier mortgage suits the operator who wants to own the premises they run from, taking control of the property, security of tenure and the upside in the value, with the trade-off of committing capital as a deposit. The alternative is to lease: under a sale and leaseback or an investment let, a separate property company owns the freehold and the operator pays rent, which frees up capital but gives up the property upside and leaves you exposed to rent reviews. If you already lease and want to own, an owner-occupier mortgage is how you buy the freehold. If you own and want to release the capital, a sale and leaseback does the reverse. We model both so you can weigh control and equity against released capital, and we confirm the regulatory treatment of whichever route you choose.