A semi-commercial mortgage is used solely to purchase a property of mixed use. If a property has both residential and commercial features, it’s classed as semi-commercial or a mixed-use property. If you apply for a standard commercial or residential mortgage, then you will encounter problems. The financial product you apply for needs to match the property you’re aiming to purchase. A semi-commercial mortgage can be used for any tenure, whether freehold or leasehold.
Examples of mixed-use properties would include, but are not limited to:
- Commercial units with flats
- Guest homes which are owner-occupied
- Pubs with self-contained accommodation
- Buildings with self-contained offices and flats
Why do I need a semi-commercial mortgage?
If the property you’re aiming to purchase has both commercial and residential elements, then you will need a semi-commercial mortgage. Lenders need to know exactly what they’re lending on. If you’ve applied for a residential mortgage, a mortgage survey would quickly establish that the property has commercial elements. For this reason alone, your application would quickly come to a halt.
If the property you wish to purchase is completely vacant, it’s registered use would indicate whether it’s residential or commercial. Furthermore, the ratio of commercial to residential has no bearing. Even if the property in question was 10% commercial and 90% residential, a semi-commercial mortgage would be required to purchase the property. There is an exception here with some lenders, only if the self-contained elements have separate access.
If the property has separate access for both the commercial and residential aspects, then some lenders may offer two separate mortgages. For instance, if the property has access from the front to a commercial unit, with separate access to the rear solely for flats, then some lenders may offer two different mortgages. This can however, cause issues if you try and use two different lenders, simply because the building itself may have shared aspects, such as roofing, flooring and ceilings.
Semi-commercial mortgage rates
Semi-commercial mortgages are usually offered up to 75% loan to value. Although the mortgage is semi-commercial, it’s still treated as a commercial mortgage. As a result, lenders will assess your business plan in relation to the commercial space. If you don’t plan to run a business from the property yourself and instead lease it, lenders will require a financial forecast of the potential rental returns that you aim to generate.
It is possible to obtain a higher LTV than 75% and in some cases a 100% mixed commercial and residential mortgage. This can only be done by offering security to the lender in the form of equity from another property or an existing business. This can be particularly useful for when you have funds tied up in other ventures that are generating an income.
How is a mixed semi-commercial mortgage structured?
Mixed commercial and residential mortgages are structured according to whether you’re solely investing or want to occupy the property. As there are so many potential variables, it’s advised to consult an advisor for a tailored answer on how a loan may be structured for the type of finance you need.
Depending on your circumstances, you may be offered an interest-only option, especially if your sole aim is to invest. If your aim is to occupy either the residential or commercial aspect, you’ll more than likely require a repayment mortgage.
Semi-commercial lenders offer a multitude of varied products. Some lenders may offer you interest only options, even if you plan to reside in the building, whereas other lenders won’t. Some lenders may offer lengthier mortgage terms than others and as a result, rates can have a vast difference.
It’s always best to find the right lender according to your own goals and circumstances, as opposed to just finding a lender that will approve you. Finding a lender that suits your budget can allow flexibility in making your commercial purchase a success.
Semi-commercial mortgage specialists
Be sure to shop around when trying to secure the right type of finance for your commercial ventures. With new products being offered daily, finding the right deal can be overwhelming. If you’re currently running a business, finding the time to engage with multiple lenders can be difficult. Financial decisions should never be rushed, as the wrong deal could break your venture.
Our expert advisors specialise in commercial mortgages and can search the entire market, finding you the best suited deal. Having access to every lender is one advantage, but the experience of knowing each lender’s criteria is paramount in ensuring your application the best chance of approval.