Can You Get a Home Loan for a Property with a Commercial Lease?

Getting a Home Loan for a Property with a Commercial Lease

Yes, you may be able to get a home loan for a property with a commercial lease, but it is usually more complex than financing a standard residential property.

A commercial lease can change how a lender views the property. Even if the property has a house, apartment or residential dwelling, the presence of a shop, office, clinic, workshop, café, consulting room, warehouse, business tenant or commercial lease may move the application away from standard residential lending.

Some lenders may consider commercial rental income, but often at a lower percentage than residential rent. Some may accept mixed-zoned properties if the property is used for residential purposes and residential use is permitted. Others may decline properties that are not exclusively residential, especially where an ongoing retail, commercial or industrial operation exists within the property boundary.

This guide explains how Australian lenders may assess residential properties with commercial leases, shopfronts, mixed-use properties, commercial rental income, commercial zoning and security risk, based on current policy research.

Can you get a home loan for a property with a commercial lease?

Possibly, but it depends on the property and the lender.

A lender may consider the application if:

• the property is mainly residential
• the commercial lease is minor or incidental
• the property remains marketable
• the title and zoning are acceptable
• the residential use is legal
• the commercial use is permitted
• the valuation supports the security
• insurance is available
• the LVR is within policy
• the lease terms are acceptable
• the lender can use the rent or ignore it without the loan failing

A lender may decline if the property is mainly commercial, industrial, retail or specialised business premises.

Why does a commercial lease matter?

A commercial lease matters because the lender is not only assessing your income. The lender is also assessing the property as security.

A commercial lease can affect:

• valuation
• marketability
• resale appeal
• loan type
• maximum LVR
• rental income treatment
• insurance
• title risk
• zoning risk
• ability to occupy the property
• whether residential or commercial finance applies

A standard house rented to a family is very different from a property leased to a café, shop, medical clinic or warehouse operator.

What is a commercial lease?

A commercial lease is a lease where a tenant uses the property, or part of the property, for business purposes.

This may include:

• retail shop
• café
• restaurant
• office
• medical clinic
• allied health clinic
• beauty salon
• hairdresser
• workshop
• warehouse
• showroom
• consulting rooms
• childcare business
• storage yard
• professional suite
• gym or studio
• accommodation operator

The lease may be registered or unregistered, short-term or long-term, related-party or arm’s-length.

For lending, the issue is whether the lease changes the property from standard residential security into mixed-use or commercial security.

Is a commercial lease acceptable for a residential home loan?

Sometimes, but not always.

A residential lender may be more comfortable if the commercial lease does not dominate the property.

For example, a lender may consider a property where:

• the main dwelling is residential
• the commercial area is small
• residential use remains permitted
• the commercial use is low-risk
• there is no major business fit-out
• the property could be sold as a home
• the lease does not restrict sale or occupation too heavily
• the valuation does not raise adverse comments

However, some residential lenders may not accept a property that is not exclusively for residential use.

What if the property is not exclusively residential?

This can be a major issue.

Some lender policies treat properties that are not exclusively residential as unacceptable, regardless of zoning. This can include a residential dwelling that has been converted to allow, or contains, an ongoing retail, commercial or industrial operation within the property boundary.

Examples may include:

• a house converted into a clinic
• a residence with a shopfront
• a dwelling with an attached commercial workshop
• a home with a separately leased office
• a property with a café operating downstairs
• a residential block with a commercial tenant at the front
• a shop-top property on one title
• a property used partly for industrial storage

Even if the borrower lives in part of the property, some lenders may not accept it under standard home loan policy.

Is a property with a commercial lease the same as mixed-use?

Often, yes.

A property with both residential and commercial use is usually considered mixed-use.

This may include:

• residence above a shop
• home with consulting rooms
• residential apartment over commercial premises
• house with leased office space
• warehouse with caretaker’s residence
• shopfront with rear dwelling
• terrace with retail use at street level
• dwelling with a separate business tenant

Mixed-use property lending depends on how much of the property is residential, how much is commercial, and whether the lender still sees it as acceptable residential security.

What if the property is mixed-zoned but used as a home?

This can be easier than a property with an actual commercial lease.

Some lender policies may accept mixed-zoned properties where the property is used for residential purposes and residential use is permitted under zoning requirements.

For example, a home may sit in a mixed-use zone but be occupied only as a residence.

A lender may be more comfortable if:

• there is no commercial lease
• no business operates from the site
• the property is residential in appearance and use
• the dwelling is legal and habitable
• insurance is standard residential insurance
• the valuation supports residential marketability

Mixed zoning alone may not be the problem. Active commercial use can be the problem.

What if the property is commercially zoned?

Commercial zoning can make a residential home loan harder.

Some lenders may decline commercial-zoned property under residential security policy. Others may consider limited cases where the property is residential in use and residential occupation is permitted.

A lender may ask:

• does zoning allow residential use?
• is the dwelling lawful?
• is the property mainly commercial or residential?
• is there a commercial lease?
• does the property have residential market appeal?
• would a future buyer need commercial finance?
• does the valuation classify the property as residential or commercial?

Commercial zoning does not always mean a loan is impossible, but it can reduce options.

What if the property is industrial-zoned?

Industrial zoning is usually harder than commercial or mixed zoning.

A lender may be concerned about:

• limited residential appeal
• industrial use
• warehouses or workshops
• environmental risk
• contamination risk
• heavy vehicle access
• noise or odour
• restricted residential occupancy
• valuation complexity
• future resale risk

Some residential lenders may not accept industrial-zoned properties at all.

Can commercial rental income be used for servicing?

Possibly.

Some lenders may accept commercial rental income, but the treatment is usually more conservative than standard residential rent.

Based on current policy research, some lender policies may use only a reduced proportion of commercial rental income, such as 50% of the lower of actual gross rent or current market rental, supported by a commercial lease agreement or rental appraisal.

This means a commercial lease may help borrowing power, but often not dollar for dollar.

Why do lenders shade commercial rent?

Commercial rent is usually shaded because lenders allow for risk.

Commercial leasing can involve:

• vacancy periods
• tenant failure
• fit-out risk
• lease incentives
• outgoings
• make-good costs
• reletting costs
• market rent changes
• longer vacancy periods than residential property
• tenant-specific use
• legal lease disputes
• commercial property cycles

A property with a vacant commercial tenancy may take longer to re-let than a standard residential dwelling.

How much commercial rent will a lender use?

There is no single rule across all lenders.

A lender may use:

• 50% of eligible commercial rent
• the lower of actual rent and market rent
• the lower of lease rent and rental appraisal
• no commercial rent
• rent only if there is a valid lease
• rent only if the tenant is arm’s-length
• rent only if the property is acceptable security
• rent only under commercial lending policy

If the loan depends heavily on commercial rent, lender selection becomes critical.

What documents prove commercial rental income?

A lender may request:

• signed commercial lease
• rental appraisal
• valuation rental assessment
• tenant payment history
• bank statements showing rent credits
• property management statement
• tax return showing rental income
• tenant details
• lease term and expiry date
• options to renew
• outgoings schedule
• evidence of arrears or no arrears
• GST treatment, if relevant
• related-party lease evidence, if applicable

A verbal rent estimate is usually not enough.

What if there is no written commercial lease?

This can make the application harder.

Without a written lease, the lender may not accept the commercial rent.

They may ask:

• who is the tenant?
• what business operates there?
• how long has the tenant occupied the property?
• what rent is paid?
• are payments regular?
• is the tenant related to the borrower?
• is the arrangement legally enforceable?
• can the tenant be removed if needed?

A written lease is much stronger than an informal arrangement.

What if the commercial lease is month to month?

A month-to-month commercial lease can be less reliable.

The lender may be cautious because the tenant can often leave with limited notice.

They may consider:

• tenant history
• how long rent has been paid
• market rent evidence
• whether the space can be re-let
• whether the property still services without the rent
• whether the lease is being renewed
• whether the valuation supports the income

A short lease may not carry the same weight as a longer lease with options.

What if the commercial lease expires soon?

A lease expiring soon can create income risk.

A lender may ask:

• when does the lease end?
• is there an option to renew?
• has the tenant confirmed renewal?
• is the tenant paying on time?
• is the rent market-based?
• is a new lease being negotiated?
• would the loan pass without the rent?
• how easy is the space to re-let?

If the rent is needed for borrowing power, a near-expiry lease can be a problem.

What if the tenant has options to renew?

Options to renew can help if the tenant is stable.

The lender may review:

• current lease term
• option period
• rent review mechanism
• tenant history
• tenant payment conduct
• market rent
• vacancy risk
• whether the option is likely to be exercised

Options do not guarantee future rent, but they can support income continuity.

What if the commercial tenant is in arrears?

Commercial tenant arrears can reduce or remove the value of the rent for servicing.

A lender may ask:

• how much rent is overdue?
• why is rent overdue?
• has a payment plan been agreed?
• is the tenant still trading?
• has the lease been terminated?
• is legal action underway?
• is the rent still reliable?
• would the loan pass without that rent?

If the tenant is behind, some lenders may exclude the income or require stronger evidence.

What if the commercial tenant is your own business?

This can be more complex.

A related-party commercial lease may be treated cautiously because rent paid by your own business to your own property-owning entity may not be independent income.

A lender may ask:

• is there a formal lease?
• is rent paid regularly?
• is rent at market rate?
• does the business have profit to support the rent?
• are payments shown in bank statements?
• is income declared in tax returns?
• is the property owner the same person as the business owner?
• is the rent simply an internal transfer?

Some lenders may not use related-party commercial rent unless the full business and property position is supported.

What if the tenant is a family member’s business?

This may also need careful evidence.

The lender may ask whether the lease is genuinely arm’s-length.

They may review:

• signed lease
• market rent evidence
• payment history
• business trading history
• tenant relationship
• tax treatment
• whether rent would continue after settlement

Related-party rent is usually less straightforward than rent from an unrelated tenant.

What if the commercial tenant is a strong national tenant?

A strong tenant can help the commercial lease appear more reliable, but it does not automatically make the property acceptable residential security.

A lender may still assess:

• property use
• title
• zoning
• lease term
• valuation
• marketability
• LVR
• whether residential lending policy applies

A national tenant may strengthen the income case, but the security type still matters.

What if the commercial tenant is a small business?

Small business tenancy can be acceptable in some cases, but lenders may be more cautious.

They may consider:

• trading history
• lease term
• rent payment history
• whether rent is current
• local demand for the space
• vacancy risk
• whether the lease is market rent
• whether the business use is specialised

A property leased to a very specialised small business may be harder to re-let if the tenant leaves.

What if the property is a shop with a residence attached?

This may require commercial or mixed-use lending.

A lender may ask:

• what percentage is shop?
• what percentage is residence?
• is the shop leased?
• is the residence self-contained?
• can the residence be occupied separately?
• is the property on one title?
• is there separate access?
• does the valuation classify it as commercial or mixed-use?
• does the lender accept the security?

This is usually not as simple as buying a normal house.

What if the property is a shop-top residence?

A shop-top residence can be financeable, but lender options vary.

The lender may assess:

• whether the shop and residence are on one title
• whether the residence has separate access
• whether there is a commercial lease
• whether the borrower will live upstairs
• whether the shop is vacant or leased
• whether the property is mainly residential or commercial
• valuation comments
• insurance
• LVR

A residential unit above shops may be easier if it is on a separate residential title.

What if the residential unit is separate from the commercial lease?

This can be easier.

For example, a residential strata apartment above a retail strip may be acceptable if the unit itself is a standard residential lot.

The lender may still consider:

• building composition
• commercial lots in the strata scheme
• noise
• odours
• insurance
• strata fees
• marketability
• valuation comments

But if the security is only the residential lot, the commercial lease may be less relevant.

What if the commercial lease is on the same title?

This is harder.

If the commercial tenant occupies part of the same title being used as security, the lender cannot easily separate the residential and commercial risk.

The lender may ask:

• how much of the property is commercial?
• how much is residential?
• does the lease bind the owner?
• can the property be sold as a home?
• does the commercial use reduce buyer demand?
• is the property more suitable for commercial finance?

One title with both residential and commercial use is often more complex than separate titles.

What if residential and commercial parts are on separate titles?

Separate titles may improve options.

A lender may be able to take security over the residential title only, depending on:

• access
• services
• title independence
• strata arrangements
• valuation
• marketability
• whether the commercial use affects residential amenity
• lender policy

If the residential property can stand alone, standard lending may be easier.

What if the property has a commercial lease downstairs and you live upstairs?

This can be possible, but it is often mixed-use.

The lender may assess:

• owner-occupied purpose
• commercial lease income
• residential area
• commercial area
• access
• lease restrictions
• insurance
• valuation
• title
• LVR

Living in part of the property does not automatically make the whole property acceptable residential security.

What if you are buying the property as an investment?

An investment property with a commercial lease may require careful assessment.

The lender may review:

• residential rental income
• commercial rental income
• lease term
• tenant quality
• vacancy risk
• zoning
• property expenses
• valuation
• LVR
• whether residential or commercial finance applies

Investment mixed-use properties can be more complex than ordinary residential rentals.

What if you want to live in the property later?

A commercial lease may restrict your ability to occupy part of the property.

The lender may ask:

• when does the lease end?
• can the tenant be removed?
• does the lease have renewal options?
• what area is leased?
• is the residential area separately available?
• will the property be owner-occupied or investment?

If the commercial lease prevents you from occupying the property, owner-occupied lending may not be appropriate.

What if the commercial lease is registered on title?

A registered lease can affect the lender’s security.

A lender may ask:

• what is the lease term?
• what area is leased?
• does the tenant have options?
• does the lease survive sale?
• is the lease ahead of the mortgage?
• are there rights affecting possession?
• does the lender need to consent?
• does the lease affect marketability?

Registered leases can make legal review more important.

What if the lease is very long?

A long lease can be positive for income but may restrict the property’s flexibility.

A lender may consider:

• tenant quality
• rent review terms
• market rent
• ability to sell with lease in place
• whether owner occupation is restricted
• whether the lease reduces buyer demand
• whether the lease is commercial or specialised

A long lease to a strong tenant may help income, but it can still make the security more commercial.

What if the lease has no rent reviews?

This can be a risk.

If rent is fixed for a long period, the income may fall behind market levels.

A lender may consider:

• lease term
• rent review clauses
• CPI increases
• market review dates
• outgoings recovery
• option periods
• tenant incentives
• whether rent is sustainable

Weak lease terms may reduce the income value of the property.

What if the tenant pays outgoings?

Commercial leases may require tenants to pay some or all outgoings.

This may include:

• council rates
• water rates
• insurance
• land tax
• strata fees
• maintenance
• management fees
• repairs

The lender may ask what expenses the owner still pays.

Even if the tenant pays outgoings, the lender may still apply conservative income shading.

What if the landlord pays outgoings?

If the owner pays outgoings, the net rental position may be weaker.

A lender may consider:

• rates
• insurance
• maintenance
• management fees
• land tax
• strata fees
• repairs
• vacancy costs
• GST or accounting costs

If commercial rent is gross rather than net, the lender may shade or adjust the income.

What if the rent is plus GST?

GST can complicate cash flow.

A lender may ask whether the rent figure is:

• inclusive of GST
• exclusive of GST
• net of GST
• declared in tax returns
• payable to a GST-registered owner
• subject to business accounting treatment

The lender may use the income figure that reflects its policy and evidence.

Tax advice should be obtained where GST applies.

What if the property is sold as a going concern?

A going concern sale may involve commercial GST treatment and lease conditions.

This can affect:

• contract structure
• settlement documents
• GST obligations
• buyer entity
• lease continuation
• valuation
• lender assessment

Residential borrowers should obtain legal and tax advice before buying a leased commercial or mixed-use property as a going concern.

What if the property has vacant commercial space?

Vacant commercial space can be a problem because the lender may not count any rent.

They may consider:

• market demand
• vacancy period
• rental appraisal
• condition of the space
• fit-out requirements
• whether the space can be used residentially
• whether the property still services without rent
• whether the valuation assumes a tenant

A vacant shopfront attached to a home can reduce market appeal if the buyer does not want commercial use.

What if the property can be converted back to residential use?

That may help, but evidence matters.

A lender may ask:

• is residential use permitted?
• are approvals needed?
• what works are required?
• what will conversion cost?
• is the commercial fit-out removable?
• will the property be habitable as a residence?
• does the valuation assume conversion?
• can insurance be obtained?

Future conversion plans may not help unless they are approved, funded and reflected in the valuation.

What if the commercial lease is only for a home office?

A true home office is usually less concerning than a commercial lease.

However, if part of the home is leased to a business, the lender may still ask questions.

They may consider:

• who leases the space?
• does the tenant have exclusive possession?
• do clients visit?
• is the lease commercial?
• is the property still residential?
• is the income being used for servicing?
• does the lease affect marketability?

A person working from home is not the same as leasing part of the property to a business.

What if the property has consulting rooms?

Consulting rooms can create mixed-use issues.

This may include:

• psychology rooms
• medical consulting rooms
• allied health rooms
• accounting office
• legal office
• beauty treatment rooms
• massage or therapy rooms

A lender may ask whether the property remains a home or has been converted into business premises.

If the consulting rooms are leased to another business, the commercial lease becomes more important.

What if the property has a commercial kitchen?

A commercial kitchen can signal business use.

The lender may ask:

• is there a food business operating?
• is there a lease?
• is council approval in place?
• are clients or customers attending?
• is the fit-out removable?
• does the property remain residential?
• does insurance cover the use?

A commercial kitchen may make the property less like standard residential security.

What if the property has a workshop?

A workshop may be acceptable if it is a domestic shed or garage.

It becomes more difficult if it is used as a business premises.

A lender may ask:

• is it leased commercially?
• is machinery installed?
• are customers or employees onsite?
• is there noise or contamination risk?
• is the use industrial?
• is zoning appropriate?
• is insurance affected?

A commercial workshop on residential security can be a serious issue.

What if the property has a retail shopfront?

A retail shopfront usually makes the property mixed-use or commercial.

A lender may consider:

• percentage of floor area used as retail
• whether the shopfront is leased
• whether the borrower operates the shop
• whether the property can be occupied as a home
• street exposure
• signage
• fit-out
• valuation comments
• commercial zoning

Retail use can reduce standard residential lender options.

What if the property is leased to a café or restaurant?

A café or restaurant lease can create additional risk.

The lender may consider:

• food-use approvals
• commercial kitchen
• exhaust systems
• grease traps
• fire risk
• odours
• noise
• late trading
• waste management
• pest risk
• insurance
• lease strength

A residence attached to or above a café may be acceptable in some cases, but the security is not as simple as an ordinary home.

What if the property is leased to a medical or allied health tenant?

A medical or allied health tenant may be more stable than some retail tenants, but the property may still be commercial or mixed-use.

The lender may assess:

• lease term
• tenant quality
• fit-out
• consulting rooms
• parking
• zoning approval
• disability access
• commercial income
• valuation
• whether the property could return to residential use

If the property has been fully converted to a clinic, residential lending may be harder.

What if the property is leased for childcare?

Childcare use can be more specialised.

A lender may consider:

• council approvals
• building classification
• lease term
• outdoor space requirements
• fit-out
• fire safety
• operator licence
• commercial valuation
• resale market
• whether the property can be used as a normal home again

Childcare leases often push a property towards commercial lending.

What if the property is leased for NDIS or supported accommodation?

Supported accommodation can be complex.

A lender may ask whether the lease is:

• standard residential
• commercial
• specialist disability accommodation
• group housing
• rooming accommodation
• provider lease
• government-linked income
• dependent on a specialised operator

Specialised leases may need closer review and may not fit ordinary residential policy.

What if the commercial lease is for storage?

Storage leases can still affect the property.

The lender may consider:

• what is being stored
• whether the use is commercial or industrial
• fire risk
• contamination risk
• public access
• signage
• vehicle movement
• insurance
• zoning
• whether the storage area dominates the site

A small storage arrangement may be different from a commercial warehouse use.

Can commercial lease income be used if the borrower is self-employed?

Possibly, but the lender may review both the lease income and the self-employed income.

If the commercial tenant is connected to the borrower’s business, the assessment becomes more complex.

The lender may ask for:

• business tax returns
• financial statements
• lease agreement
• rent payment evidence
• accountant information
• company or trust documents
• related-party details
• market rent evidence

The lender may want to avoid double-counting the same business cash flow.

Related research: Self-Employed Home Loans: Which Australian Lenders May Accept 1-Year Financials, 1-Year ABNs or Alt Doc Income?

Can commercial lease income be used if the property is owned in a trust?

Possibly.

If a trust owns the property, the lender may review:

• trust deed
• trustee
• beneficiaries
• lease agreement
• rental income
• tax returns
• financial statements
• guarantees
• property type
• loan purpose
• whether residential or commercial lending applies

Trust ownership plus commercial lease income can be more complex than personal ownership of a rental house.

Can a company buy a property with a commercial lease?

Possibly.

A company borrower may be more common where the property has commercial use.

The lender may assess:

• directors
• shareholders
• guarantees
• company financials
• commercial lease
• rental income
• property valuation
• loan purpose
• LVR
• whether the facility is residential or commercial

Some residential lenders may not lend to company borrowers for mixed-use or commercial security.

Related research: Can an SMSF Buy Rural or Commercial Property Around Cairns?

Can an SMSF buy a property with a commercial lease?

Possibly, but SMSF lending is specialist.

A commercial lease can be acceptable in some SMSF strategies, but the property and lease must comply with superannuation rules.

A lender may assess:

• whether the property is residential or commercial
• whether the tenant is related
• whether the lease is arm’s-length
• SMSF liquidity
• member contributions
• title structure
• bare trust documents
• rental income
• valuation
• LVR

SMSF borrowing should involve specialist legal, tax and financial advice.

Can commercial finance be used instead of a home loan?

Yes, commercial finance may be more appropriate where the property is mainly commercial or mixed-use.

Commercial finance may suit properties such as:

• shop and residence on one title
• commercial office with dwelling
• warehouse with caretaker’s residence
• retail premises with upstairs accommodation
• leased commercial property
• property mainly used by a business
• business premises with residential component

Commercial lending usually has different rules from residential home loans.

How is commercial finance different?

Commercial finance may involve:

• lower maximum LVR
• higher interest rates
• shorter loan terms
• annual reviews
• commercial valuation
• lease review
• business income assessment
• higher fees
• GST considerations
• different repayment structures
• solicitor review of lease documents
• more complex settlement

A property that does not fit residential lending may still be financeable commercially, but the terms may differ.

Can you get residential rates for a property with a commercial lease?

Maybe, but only if the lender treats the property as residential security.

If the property is classified as mixed-use or commercial, residential rates may not be available.

The outcome may depend on:

• property use
• title
• zoning
• lease
• valuation
• percentage of residential area
• borrower type
• loan purpose
• lender policy
• LVR

A broker can help identify whether residential lending is realistic.

Can first-home buyers buy a property with a commercial lease?

Possibly, but it can be difficult.

First-home buyers usually need a property they can occupy as a home.

A commercial lease may create issues if:

• the tenant has possession of the property
• owner occupation is not possible
• the property is not standard residential security
• first-home buyer scheme rules require residential occupation
• the commercial component is significant
• LMI applies
• the property has limited market appeal

If you cannot live in the property as required, it may not suit a first-home buyer loan or scheme.

Can a property with a commercial lease qualify for first-home buyer schemes?

Sometimes, but it needs careful checking.

Scheme rules may require the property to be residential and owner-occupied.

A property with a commercial lease may be problematic if:

• the buyer cannot occupy the property
• the property is partly commercial
• the title is not standard residential
• the zoning is commercial or industrial
• the property is used as business premises
• the loan is assessed as commercial

You should check scheme eligibility before relying on any first-home buyer pathway.

Can you buy a commercial-leased property with a low deposit?

Possibly, but it is harder.

Low-deposit loans usually involve higher LVR and possibly lenders mortgage insurance.

Commercial lease properties may be harder at high LVR because:

• security is non-standard
• valuation may be conservative
• commercial income may be shaded or excluded
• LMI may not accept the security
• lender policy may cap the LVR
• marketability may be limited

A larger deposit may improve lender options.

Does LVR matter with commercial lease properties?

Yes, LVR matters significantly.

LVR means loan-to-value ratio. It compares the loan amount to the property value.

A property with a commercial lease may be easier if:

• LVR is low
• no lenders mortgage insurance applies
• residential use is dominant
• the valuation is strong
• the lease is acceptable
• the title is clear
• the property is marketable
• insurance is available

Higher LVR makes lender and insurer scrutiny more intense.

Does LMI apply to commercial lease properties?

It can, but LMI can make the application harder.

Mortgage insurers may be cautious where:

• the property is not purely residential
• commercial use exists
• marketability is limited
• valuation comments are adverse
• zoning is commercial or industrial
• commercial rent is needed for servicing
• the lease restricts use
• the property has specialised fit-out

Even if the lender is open to the property, the mortgage insurer may not be.

Can professionals use an LMI waiver?

Possibly, but the property still needs to be acceptable.

An LMI waiver may help eligible professionals borrow above 80% LVR without paying LMI.

However, an LMI waiver does not make a commercial or unacceptable security acceptable.

A lender may still decline if the property is:

• not exclusively residential
• industrial-zoned
• commercially dominated
• subject to an unacceptable lease
• limited in market appeal
• valued as commercial property
• outside security policy

Borrower eligibility and property eligibility are separate issues.

Can you refinance a property with a commercial lease?

Possibly.

A refinance lender may review:

• current loan conduct
• property valuation
• lease documents
• rental income
• zoning
• insurance
• title
• LVR
• cash-out purpose
• borrower income
• whether residential or commercial lending applies

If your current lender accepted the property years ago, that does not guarantee a new lender will accept it today.

Can you release equity from a property with a commercial lease?

Possibly, but available equity may be limited.

The lender may consider:

• valuation
• maximum LVR
• lease strength
• property type
• cash-out purpose
• commercial use
• income and servicing
• current mortgage conduct
• insurance
• marketability

If the property is treated as commercial or mixed-use, the maximum LVR may be lower than for a standard home.

Can you use equity for business purposes?

Possibly, but lender treatment varies.

If you want to release equity for business use, the lender may ask for:

• use of funds
• business plan or explanation
• business financials
• tax returns
• invoices or contracts
• whether funds will be used for working capital
• whether funds will pay tax debt
• whether commercial lending is required

Some residential lenders limit business-purpose cash out.

Can you renovate a property with a commercial lease?

Possibly.

A lender may need to know whether the renovation is residential or commercial.

They may ask:

• what work is being done?
• is council approval required?
• does the commercial tenant need to vacate?
• is rent affected during works?
• is there a builder quote?
• is the property habitable?
• does the valuation assume completed works?
• is construction finance needed?

Renovating a mixed-use or commercial-leased property may be more complex than renovating a standard home.

Can you convert a commercial-leased property back to residential?

Possibly, but it may require approval, works and vacant possession.

A lender may ask:

• when does the lease end?
• can the tenant be removed?
• is residential use permitted?
• are approvals required?
• what works are needed?
• what will conversion cost?
• is insurance available?
• does the valuation support residential use?

Until conversion is complete, some lenders may still assess the property as mixed-use or commercial.

Can you buy a property and remove the commercial tenant?

Possibly.

If you intend to occupy the property as a home, the lender may need evidence that the tenant will vacate.

This may include:

• contract condition for vacant possession
• lease expiry date
• tenant surrender agreement
• solicitor confirmation
• evidence residential occupation is permitted
• valuation based on residential use

If the tenant has rights to remain, owner-occupied lending may not be suitable.

What if the property is sold with vacant possession?

Vacant possession can make the application easier if the property will be used as a residence.

However, the lender may still consider:

• current layout
• zoning
• prior commercial fit-out
• whether conversion is needed
• whether the property is habitable as a home
• whether valuation supports residential use
• whether insurance is available

A vacant shopfront is not automatically a standard home.

What if the property is still fitted out as a business?

Commercial fit-out can affect marketability.

This may include:

• reception desk
• treatment rooms
• commercial kitchen
• shelving and counters
• salon basins
• workshop benches
• cool rooms
• exhaust systems
• disabled-access modifications
• signage

The lender may ask whether the fit-out is removable and whether the property can function as a residence.

What if there is signage?

Signage can indicate commercial use.

A lender or valuer may ask:

• what business operates there?
• is the business still trading?
• is there a lease?
• is signage permanent?
• will it be removed?
• does it affect residential appeal?
• does council approval apply?

Signage alone may not cause decline, but it can support a mixed-use classification.

What if customers visit the property?

Customer access can make the property more commercial.

Examples include:

• retail customers
• clinic patients
• salon clients
• café patrons
• office clients
• workshop customers
• childcare families
• gym members

If customers regularly attend the premises, the property may not be viewed as ordinary residential security.

What if employees work onsite?

Employees working onsite can also support commercial-use classification.

A lender may consider:

• business scale
• parking
• customer access
• signage
• council approval
• insurance
• workplace safety
• property fit-out
• impact on residential use

A small home office is different from a workplace with staff and clients.

What if there is a commercial lease but no business is operating?

The lease still matters.

Even if the tenant is not actively trading, the lease may give the tenant rights over the property.

A lender may ask:

• is the lease still valid?
• is rent being paid?
• can the lease be terminated?
• is the tenant in arrears?
• is the tenant in administration?
• will the tenant vacate before settlement?
• does the lease affect saleability?

An unused leased premises can still create legal and valuation risk.

What if the commercial tenant has gone broke?

This is a serious income and vacancy risk.

A lender may ask:

• is rent still being paid?
• has the tenant entered administration or liquidation?
• is the lease terminated?
• are arrears owed?
• is there a bank guarantee?
• can the premises be re-let?
• is income being used for servicing?

If the tenant has failed, the lender may exclude the rent.

What if the tenant has a bank guarantee or bond?

A bank guarantee or bond may provide some security, but it does not replace ongoing rent.

A lender may still assess:

• lease strength
• tenant payment history
• vacancy risk
• reletting prospects
• whether the guarantee is enough to cover arrears
• whether the income is sustainable

A guarantee may help with landlord risk but may not materially improve borrowing power.

What if the commercial lease includes incentives?

Lease incentives can affect true rent.

Examples include:

• rent-free periods
• fit-out contributions
• discounted rent
• stepped rent
• landlord works
• cash incentives
• delayed rent commencement

A lender may ask whether the stated rent is actually being received.

If a tenant is in a rent-free period, the lender may not use the full face rent.

What if the rent is above market?

Above-market rent can be treated cautiously.

A lender may use the lower of actual rent and market rent.

They may ask:

• why is rent above market?
• is the tenant related?
• are incentives involved?
• is the rent sustainable?
• what does the rental appraisal show?
• what does the valuation show?

If commercial rent is inflated, the lender may reduce the income used.

What if the rent is below market?

Below-market rent may reduce borrowing power, but it may also be seen as more sustainable.

A lender may still use the lower actual rent if that is what is being received.

They may ask:

• can rent increase?
• when is rent reviewed?
• are there options?
• is the tenant related?
• is the lease commercial?
• is there market evidence?

The lender usually relies on documented rent, not hoped-for future rent.

What if the commercial lease is to a government or council tenant?

This may be viewed as a stronger tenant profile, but the property still needs to be acceptable.

A lender may assess:

• lease term
• rent amount
• tenant entity
• options
• rent reviews
• property use
• title
• valuation
• zoning
• whether residential lending applies

A strong tenant does not override unacceptable property security.

What if the commercial lease is for a short-stay accommodation operator?

This can be more complex.

The property may be used as:

• serviced accommodation
• Airbnb management
• holiday letting
• boarding accommodation
• student accommodation
• supported accommodation
• motel-style operation

A lender may treat this differently from an ordinary commercial lease or residential tenancy.

If the property is operated like accommodation business, commercial finance may be required.

What if the property is a serviced apartment?

Serviced apartments are often restricted or unacceptable with many residential lenders.

Concerns may include:

• management agreement
• rental pool
• limited owner occupation
• short-stay use
• hotel-style operation
• small living area
• limited resale market
• commercial nature

A commercial lease to an accommodation operator may make a serviced-apartment-style property harder to finance.

Related research: Can You Get a Home Loan for a Serviced Apartment?

What if the commercial lease affects insurance?

Insurance is important.

A lender may require evidence that the property is properly insured for its use.

Commercial use may require:

• commercial building insurance
• landlord insurance
• public liability insurance
• business-use disclosure
• tenant insurance
• fire safety compliance
• strata insurance

If insurance does not match the actual use, lender risk increases.

What if residential insurance is not available?

This may indicate the property is not standard residential security.

A lender may ask:

• why is residential insurance unavailable?
• is the property commercial?
• is the use mixed?
• is there a high-risk tenant?
• is the property properly approved?
• can commercial insurance be obtained?
• is the premium affordable?

Insurance availability can influence lender approval.

What if the strata building has commercial lots?

This may matter even if your unit is residential.

A lender may review:

• commercial lot percentage
• building insurance
• strata levies
• special levies
• noise and odours
• fire safety
• access
• parking
• valuation comments

A residential apartment above shops can be acceptable, but the building composition may still affect risk.

What if the commercial tenant is a restaurant or café below?

Restaurants and cafés can affect amenity and valuation.

A lender may consider:

• noise
• odour
• fire risk
• grease traps
• waste storage
• late trading
• pest risk
• exhaust systems
• strata insurance
• buyer appeal

The issue is usually stronger where the residence and commercial premises are on the same title or physically integrated.

What if the property is above a pub or nightclub?

This can be more difficult.

A lender may be cautious because of:

• noise
• late trading
• security issues
• limited residential appeal
• valuation comments
• insurance risk
• future resale concerns

Some properties above pubs or night venues can still be financed, but the valuation and LVR matter.

What if the property has environmental risk?

Commercial leases can sometimes create environmental concerns.

Examples include:

• mechanical workshop
• fuel storage
• dry cleaner
• industrial use
• chemical storage
• manufacturing
• former petrol station
• printing business
• contaminated soil risk

A lender may request further reports or decline if contamination risk is material.

What if the property has a dry cleaner or mechanic tenant?

These uses can create contamination or environmental risk.

A lender may ask:

• what chemicals are used onsite?
• are there underground tanks?
• is there soil contamination risk?
• is there environmental reporting?
• does the valuation mention contamination?
• is insurance available?
• is the lease use approved?

Such properties may be more suitable for commercial lending.

What if the property is heritage-listed and leased commercially?

Heritage and commercial use can both add complexity.

A lender may consider:

• heritage restrictions
• maintenance obligations
• commercial lease terms
• renovation limits
• valuation comments
• insurance cost
• buyer demand
• LVR

A heritage property with a commercial lease may need careful lender selection.

What if the property has a liquor licence?

A liquor licence can indicate hospitality use.

A lender may ask:

• is the property leased to a bar, pub or restaurant?
• does the licence attach to the premises?
• does it affect residential amenity?
• is the lease commercial?
• does the valuation classify the property as commercial?
• is insurance appropriate?

Hospitality use can push the application toward commercial assessment.

What if the commercial lease is only temporary?

A temporary lease may be less concerning if it ends before settlement or if the property will be vacant.

The lender may ask for:

• lease end date
• tenant vacate notice
• contract condition
• solicitor confirmation
• evidence of vacant possession
• plan for residential use

If the commercial lease continues after settlement, the property may still be treated as mixed-use.

What if there are multiple leases?

Multiple leases increase complexity.

The property may have:

• residential lease
• commercial lease
• storage lease
• licence agreement
• rooming agreements
• car space lease
• signage lease

A lender may need to understand each income stream and each tenant’s rights.

Too many lease arrangements can make a property look more like an income-producing commercial asset than a standard home.

What if the property has a lease over part of the land only?

A lease over land can still affect lender security.

Examples include:

• telecommunications equipment
• billboard
• parking area
• storage yard
• access rights
• farming use
• commercial shed

A lender may ask whether the lease affects value, access, use, insurance or marketability.

What if there is a telecommunications lease?

A telecommunications lease may involve equipment on the land or building.

A lender may consider:

• lease term
• rent amount
• access rights
• health or amenity concerns
• valuation comments
• marketability
• whether the lease is registered
• whether future buyers would object

This can be acceptable with some lenders but should be disclosed.

What if there is a billboard lease?

A billboard lease can affect value and marketability.

The lender may ask:

• where is the billboard located?
• is the lease registered?
• what access rights exist?
• how long is the lease?
• does it affect residential use?
• does the valuation include the income?
• is the rent reliable?

Some residential lenders may not rely on billboard income.

What if there is a lease over parking spaces?

A car space lease may be relevant in mixed-use buildings.

A lender may consider:

• whether parking is part of the title
• who has rights to use it
• whether residential amenity is affected
• whether the lease income is material
• whether the lease restricts sale

A small car space lease may be less significant than a lease over the main building.

Can the lease stop the lender from taking possession?

The lease may affect possession rights.

If a borrower defaults and the lender sells the property, the buyer may need to take the property subject to the lease.

This can affect:

• sale price
• buyer pool
• settlement timing
• vacant possession
• legal enforcement
• valuation
• marketability

This is one reason lenders review commercial leases carefully.

What documents should you collect before applying?

Useful documents may include:

• contract of sale
• title search
• zoning certificate
• commercial lease
• residential lease, if applicable
• rental appraisal
• tenant payment history
• property management statement
• valuation report
• insurance certificate
• strata documents
• outgoings schedule
• GST information
• lease assignment documents
• evidence of vacant possession, if relevant
• council approval for current use
• building approvals, if fit-out is material

The more complete the evidence, the easier it is for a lender to assess the property.

What should your solicitor check?

Your solicitor or conveyancer may review:

• lease terms
• tenant rights
• lease registration
• options to renew
• rent review clauses
• outgoings
• GST clauses
• vacant possession
• zoning
• permitted use
• title restrictions
• caveats or encumbrances
• assignment at settlement
• whether the lease affects your intended use

Legal advice is especially important when a commercial lease is attached to the property.

What should your broker check?

A broker can help check lender policy before the application is lodged.

This may include:

• whether residential lending is possible
• whether commercial finance is more suitable
• maximum LVR
• whether commercial rent can be used
• how much rent may be used
• whether the property is acceptable security
• whether LMI is available
• valuation risk
• cash-out policy
• borrower structure
• documents required

This can reduce the risk of applying to the wrong lender.

Should you get finance approval before signing?

Yes, especially if the commercial lease is material.

A pre-approval based on your income may not confirm the property is acceptable.

Before going unconditional, check:

• zoning
• title
• lease terms
• residential vs commercial use
• valuation risk
• insurance
• LVR limits
• LMI availability
• whether commercial rent can be used
• whether commercial finance is needed

The property assessment may be just as important as borrowing power.

Can pre-approval cover a commercial-leased property?

Not fully.

Pre-approval usually checks your income, debts, credit history and deposit.

Final approval still depends on the specific security property.

The lender may later decline because of:

• commercial lease
• mixed-use classification
• commercial zoning
• industrial zoning
• low valuation
• limited marketability
• LMI security restrictions
• unacceptable tenant use
• title or lease issues

Do not assume a standard pre-approval applies to a property with a commercial lease.

Should you buy at auction?

Be careful.

Auction purchases are usually unconditional.

If you buy a property with a commercial lease at auction and the lender later declines the security, you may still be required to settle.

Before bidding, check:

• lender policy
• lease documents
• zoning
• title
• valuation risk
• insurance
• LVR
• whether commercial finance is available
• whether backup lenders exist

Commercial-leased properties should be checked before auction day.

10 common mistakes with commercial lease home loans

1. Do not assume a property with a commercial lease qualifies for a normal home loan.
2. Do not rely on commercial rent without checking policy.
3. Do not assume the lender will use 100% of the rent.
4. Do not ignore lease expiry dates.
5. Do not ignore tenant arrears.
6. Do not assume mixed zoning is enough.
7. Do not ignore commercial or industrial use.
8. Do not assume a pre-approval confirms the property.
9. Do not assume LMI will accept the security.
10. Do not buy at auction before checking lender appetite.

How to improve your chances of approval

Before applying, it helps to prepare the file properly.

Useful steps include:

• obtain the full commercial lease
• confirm the lease term and options
• confirm whether rent is current
• obtain rent payment evidence
• obtain a rental appraisal
• confirm zoning
• confirm residential use is permitted
• review the title
• check whether the property is one title or separate titles
• confirm insurance availability
• understand the residential and commercial split
• keep LVR conservative
• avoid relying fully on commercial rent
• check whether residential or commercial finance is suitable
• compare lender policy before lodging

The clearer the lease, property use and valuation risk, the stronger the application may be.

Should you wait before applying?

Sometimes waiting can help.

Waiting may improve your options if:

• the lease is about to be renewed
• the tenant is in arrears
• vacant possession is pending
• zoning evidence is missing
• valuation risk is unclear
• insurance is not confirmed
• commercial use is ending
• LMI applies
• lease documents are incomplete

You may not need to wait if:

• the lease is current
• tenant payments are regular
• the property is acceptable security
• valuation is strong
• insurance is available
• LVR is conservative
• the lender accepts the rent and property type

A broker can compare whether applying now or waiting for clearer documents would improve lender options.

Example scenarios

Scenario 1: Residential unit above shops

You buy a residential apartment above shops, and the commercial leases are in separate lots below.

This may be acceptable if your unit is standard residential security and the valuation has no adverse comments.

Scenario 2: Shopfront and dwelling on one title

You buy a property with a retail shop at the front and residence at the rear on one title.

This may require mixed-use or commercial lending, depending on the property split and lease.

Scenario 3: House with leased consulting room

A home has one room leased to an allied health practitioner.

Some lenders may consider it if the commercial use is minor, but others may decline because the property is not exclusively residential.

Scenario 4: Commercial rent needed for servicing

You need the commercial rent to qualify for the loan.

The lender may only use a reduced percentage of the rent and may require the lease, rental appraisal and payment evidence.

Scenario 5: Tenant in arrears

The commercial tenant has not paid rent for two months.

The lender may exclude the income or ask whether the lease is still reliable.

Scenario 6: Commercial use ending before settlement

The seller agrees to provide vacant possession, and you will use the property as a home.

The lender may still review zoning, layout, valuation and whether the property is suitable residential security.

So, can you get a home loan for a property with a commercial lease?

Yes, you may be able to get a home loan for a property with a commercial lease, but the details matter.

The strongest applications usually have:

• mainly residential use
• acceptable title and zoning
• strong valuation
• good marketability
• confirmed insurance
• clear lease documents
• reliable rent evidence
• acceptable lease term
• conservative LVR
• no dominant retail, commercial or industrial use
• lender policy that accepts the security

A minor commercial lease may be manageable with the right lender. A property dominated by business use may need commercial finance instead of a standard home loan.

Need help getting a loan for a property with a commercial lease?

A mortgage broker can help compare lenders that may consider residential properties with commercial leases, shop-top housing, mixed-use security, commercial rental income, related-party leases and properties that may sit between residential and commercial lending.

We can review the lease, zoning, title, valuation risk, rental income, insurance, LVR, deposit and borrowing power before you apply.

If you are buying or refinancing a property with a commercial lease, speak with a mortgage broker who understands how different lenders assess residential, mixed-use and commercial security.