Care Home Mortgages

What is a care home mortgage and how does it work?

Although when we think about care home properties we think residential, a care home mortgage is a commercial mortgage. That’s because you are looking to purchase a property (the care home) as a business.

Generally speaking, care home mortgages work just like any other commercial mortgage. However, this does not mean you can get an “off-the-shelf” mortgage. Each care home mortgage is bespoke to the applicant, property, circumstances and experience. As with any commercial mortgage, you can expect higher rates and deposits than other types of mortgage, due to the element of risk associated with businesses.

How do I get a care home mortgage?

The first step in securing a care home mortgage is contacting a specialist mortgage broker, like ourselves. We know the market like the back of our hands and specialist mortgages are what we do. As an established broker, we’ve spent years forming lender relationships and work with a range of providers. That means we know which lenders to approach for a care home mortgage.

These mortgage lenders then assess your application on how closely it meets their lending appetite. Remember that you will need to prove that you can meet the minimum repayments for this mortgage and you will need to show financial proof that your business can support this. Bank statements, credit ratings, business plans and plenty more will need to be prepared for the application. The Coreco Commercial team will be on hand to guide you through the paperwork required for your specific circumstances.

Care home mortgages and industry experience

Something you should be aware of when applying for a care home mortgage is that this type of mortgage generally requires proof of previous operating experience, particularly in the care sector. As expected, the more experience you have, the better, and it’s preferable to be able to show at least a few years of experience.

If you don’t have direct experience, but can demonstrate experience in a related sector, you may still be able to secure a care home mortgage by providing sufficient proof of your financial and personal competency i.e. reducing associated risk levels.

CQC reports & approval

The Care Quality Commission is an independent regulator of adult social care in England. Their reports and ratings are considered heavily within your mortgage application, plus you need their approval to run a care home in England.

If you are purchasing a pre-existing care home, the CQC rating will be a key area of consideration in your commercial mortgage application. If a rating is low, lenders could view this care home as not suitable for lending purposes. Your personal expertise may be considered as a counterpart to this, but it is always advisable to look for a care home with a positive CQC rating. You should also note that previous CQC reports may be considered as indicators of future performance.

New care home owners should also consider their own CQC application when applying for a care home mortgage. The process of application, review, interview and approval can be lengthy and can take up to 10 weeks for even the most well-prepared applicants.

Do occupancy rates affect care home mortgages?

Unsurprisingly, low occupancy rates indicate reduced turnover, reduced profitability and reduced affordability, meaning they can be very influential on the success of your commercial mortgage application. This is another factor to be considered before looking to purchase a care home business.

Whatever the route, preparing for and applying for any commercial mortgage is a detailed and strenuous task, so it’s always best to seek advice and support from experienced professionals.

If you’re an existing care home owner, you may be looking to:

• Remortgage a care home
• Expand a portfolio of care homes

Remortgaging a care home

It is possible to remortgage a residential home / care home. However, owners should be aware that this is determined entirely by current trading performance as lenders will review this to consider future performance and CQC ratings will be a key indicator of this. In some instances, lenders may also accept performance projections based on new changes within the business, particularly streamlining procedures and cost-saving implications.

Expand a portfolio of care homes

If you are looking to purchase further care homes to expand your portfolio, many of the areas discussed in purchasing as a first-time buyer will apply. However, in this scenario, CQC ratings and reports will be considered for both the new property, as well as your existing care home businesses.