Care home and nursing home finance

Care home mortgages: what you can borrow

Care home lending is a specialist product and a general business banking desk will usually quote you a shorter term and a lower loan to value than a lender with a healthcare book, on exactly the same home. The ranges below are property-secured commercial mortgages — the conventional route, and what most people are quoted. They are what the sector was offering as at October 2026.

Do not read that table as the ceiling. Those percentages are measured against the going-concern valuation of the property. Trade-backed and cash-flow facilities are measured against a different number altogether and can reach a far higher proportion of the purchase price — see when a mortgage is not enough below. If you are short of deposit against the figures here, that is the section that matters.

On the conventional route, a £2,000,000 home at 65% needs £700,000 of deposit, with LBTT or stamp duty, legal and valuation fees and working capital on top of that. Debt service cover is usually the real constraint rather than the loan to value — most lenders want adjusted profit to exceed the loan payments by 30% to 50%.

The five things underwriters actually look at

• Regulator rating — the gate everything else passes through. In England most lenders want a CQC rating of Good or Outstanding. In Scotland the Care Inspectorate grades on a one to six scale across the key questions of its quality framework — wellbeing, leadership, the staff team, the setting and how care is planned — and lenders generally want grade 4 (Good) or above. A grade 3 or a Requires Improvement cuts the panel sharply; an admissions embargo usually stops mainstream lending until it is lifted
• Occupancy — the sector benchmark is around 85% and above, and the trend matters as much as the level. A home at 80% and climbing reads very differently from one at 88% and falling
• Self-funding versus local authority mix — the biggest single driver of profitability. Self-funding residents pay materially more than local-authority rates, so a home in an affluent catchment with a high private share supports more debt than an identical building reliant on council placements
• Room quality and registered beds — en-suite rooms with wet rooms command higher fees and value better. Shared facilities and small non-en-suite rooms are discounted, because they are hard to sell to self-funders and carry future capital expenditure
• Staffing — agency usage is the margin killer in this sector. Persistent agency reliance, high turnover or a vacant registered manager post will all reduce the profit figure a lender is willing to work from

Why the valuation is not a property valuation

A care home is valued as a fully operational trading entity by a valuer who specialises in healthcare. The figure reflects the trade — fee rates, occupancy, staffing cost, the catchment — rather than the floor area.

The metric lenders work from is EBITDARM: earnings before interest, tax, depreciation, amortisation, rent and management. Stripping out rent and management lets a lender compare homes on the same footing whether the operator owns the freehold or pays rent, and whatever the current owner chooses to pay themselves. The lender then rebuilds that figure from your accounts — adding back the vendor's drawings and one-off costs, and deducting a market-rate manager's salary if the owner has been working in the home. The adjusted number is usually well below the headline profit in the sales particulars, and it is the one the loan is sized against.

Buying a care home

1. Establish the funding position before you offer

   Vendors' agents in this sector ask about funding early and will discount an unfunded offer. Knowing what you can borrow costs nothing and routinely beats a higher bid with no finance behind it.

2. Get the trading information early

   Three years of accounts, current management figures, occupancy by week and the fee schedule split between self-funded and local authority. Without these a lender cannot size anything and you are guessing.

3. Registration is the bottleneck, not the loan

   Registration does not transfer with the business. The new provider must register with CQC in England, the Care Inspectorate in Scotland, CIW in Wales or RQIA in Northern Ireland. CQC does not publish a fixed decision time and says registration can take several months. Completion is normally conditional on it, so start the day the offer is accepted.

4. Specialist valuation

   Insist the valuer is a healthcare specialist. A general commercial valuer will value the building, and the building is not what you are buying.

5. Due diligence worth paying for

   Staff TUPE obligations and the registered manager's intentions, outstanding regulatory actions or conditions, fire safety and sprinkler provision, Legionella and premises compliance, the deferred maintenance position, and any local authority contract terms.

Turnaround and underperforming homes

Homes with a weak rating, low occupancy or a departed manager sell at a discount, and for an experienced operator that discount is the opportunity. They rarely fund on a term loan at the outset.

The usual structure is a short-term facility — bridging or a specialist turnaround line — at a lower loan to value, advanced on the strength of your plan and your record rather than the home's current numbers. Once the rating recovers and occupancy rebuilds, the home refinances onto a conventional commercial mortgage at a materially better rate.

Plan the exit before you draw the bridge. The single most common failure in this sector is a turnaround facility maturing before the inspection cycle has caught up with the improvement.

When a mortgage is not enough

Most people who come to us about a care home have already been to a bank, and the answer came back as a number lower than the deal needs. That is usually not because the business is weak. It is because a mortgage is secured on the building, and a care home’s worth sits mostly in the trade.

We can place cases with funders who lend against the trading business as well as the property. The practical effect is that the amount available is not capped by the bricks-and-mortar valuation, and a deal that failed a bank’s loan to value test can still be fundable.

Why the percentages look so different. A commercial mortgage is sized as a share of the property’s going-concern valuation — hence the 60% to 70% in the table above. A trade-backed facility is sized against the business, and its limit is set against the vacant possession value of the building: what the empty property is worth with no trade attached. That number is usually well below the going-concern value, so a facility expressed as a multiple of it can reach or exceed the whole going-concern value — and therefore a far higher share of the purchase price than any mortgage percentage suggests. Add property you already own as further security and it moves again.

Two lenders, the same home, the same week, and two completely different answers — because they are not measuring the same thing. Knowing which question to ask, and of whom, is most of the job.

Where that tends to help:

• You are short of deposit on a home that trades well. The gap between what the building is worth and what the business is worth is exactly the gap these funders will look at
• You already own a home and want another. Property you hold can often be used as additional security instead of you finding more cash
• You are buying something that needs turning round. Extensions, refurbishment, re-registration, rebuilding occupancy — fundable as part of the same facility rather than found afterwards
• You are buying out a partner, or backing a management buy-out or buy-in
• You want to take money out of a business you have built, without selling it
• You are juggling several facilities and want one that covers both the secured and the unsecured borrowing
• You need headroom in the early months. An interest-only period while occupancy rebuilds is often available

This sits alongside conventional commercial mortgages rather than replacing them. It generally starts at around £2m, runs to about five years, and needs a business that is profitable or close to it with a credible team behind it. Below that, a commercial mortgage is usually the better answer and we will say so.

If a lender has turned you down on loan to value, it is worth a second opinion before you accept it. The conversation is free and takes twenty minutes.

What a broker actually does on a care home deal

Care home lending is not a product you shop for on price. Two lenders looking at the same home will often differ by hundreds of thousands of pounds on what they will advance, because they rebuild the trading figures differently and weigh the rating, the fee mix and the room stock differently. Most of the value in using a broker sits in that gap.

• Reaching past the clearing banks. Your own bank will quote you something. Whether it is the best available depends entirely on who else saw the case. Beyond the high street there are challenger banks with healthcare books, specialist short-term lenders for turnarounds, and the institutional and private credit layer described above — and they are not on comparison sites
• Building the case the way an underwriter needs it. Adjusted EBITDARM, the occupancy and fee analysis, the staffing and agency position, the capital expenditure plan. A credit paper that answers the obvious questions before they are asked gets a better answer than one that arrives as a pile of accounts
• Getting the right valuer instructed. A general commercial valuer values the building. A healthcare specialist values the trade. On a care home that difference routinely moves the number by six figures, and it is decided at instruction
• Running it as a competitive process. Several lenders considering the case at once, with the same information, so the terms you take are the best of a field rather than the first offer that arrived
• Sequencing the transaction. Registration with the regulator, the valuation, the legals and the funding all run on different clocks. Knowing which to start first is usually what decides whether you complete in four months or nine
• Knowing who will look at a difficult case. A grade 3, an embargo, a vacant manager post, a first-time entrant. Most lenders say no. The work is knowing the handful who say yes, and what they need to see

The initial conversation is free and there is no obligation. If the deal does not work we will tell you that, with the reason, rather than spend three months finding out slowly. Where a fee applies it is agreed in writing before any work starts, and it is set out in our fees and terms.

Refinancing a care home you already own

Most operators are on borrowing arranged when they bought and never revisited. If occupancy, fee rates and the private-pay share have improved since, the facility can be resized against current trading rather than the figures you bought on.

• Fund an acquisition — usually the cheapest capital available, raised against a proven trading business
• Release equity from a freehold that has appreciated with the trade
• Fund refurbishment — converting rooms to en-suite, or adding registered beds, raises both fee rates and value
• Buy out a partner or shareholder without draining working capital
• Exit a turnaround facility onto long-term debt once the rating and occupancy support it
• Consolidate equipment finance and short-term borrowing built up since purchase

If you are in Scotland

• Care homes are registered and inspected by the Care Inspectorate, not CQC. Grades run one (Unsatisfactory) to six (Excellent) across the key questions of its quality framework. Lender criteria are usually written in CQC language, so Scottish grades need explaining to the credit team rather than left to be translated
• Free personal and nursing care changes the fee model. Scotland pays set weekly amounts towards personal and nursing care for assessed residents regardless of means — £260.30 and £117.10 a week respectively from 1 April 2026, reviewed each Scottish financial year. These reduce the resident's invoice rather than arriving as additional income, and they need modelling correctly in the fee analysis
• Local-authority rates are set through the National Care Home Contract, negotiated annually. The structural reform element of the National Care Service was dropped in 2025, so the NCHC remains the mechanism, and its settlement directly affects any home with significant council placements
• Commercial security is taken by standard security, and the Scottish conveyancing timetable differs from England — worth building into the completion date rather than discovering late
• Where a home occupies converted or listed property, planning and change-of-use history matters to the valuer and occasionally to the regulator

What we will need to see

• Three years of accounts, plus current management accounts where the year end is over six months old
• The most recent inspection report and any action plan or conditions arising from it
• Occupancy history, ideally weekly, and the fee schedule split between self-funded, local authority and NHS-funded residents
• Registered bed numbers, and the breakdown of en-suite against shared facilities
• Staffing structure, agency spend, and the registered manager's position and credentials
• Your CV and sector experience, and that of anyone else in the operating team
• For a purchase: the sales memorandum and, where leasehold, a copy of the lease
• A personal assets and liabilities statement for each borrower or guarantor