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 mixed-use.
If you apply for a regular commercial or residential mortgage, then you will encounter problems. The mortgage you apply for needs to be suitable for the property you’re aiming to buy. 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
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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 be declined.
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 a property has separate access for both its commercial and residential aspects, then some lenders may offer two separate mortgages. For instance, if the property has front access to a commercial unit, with rear separate access for flats, then some lenders may offer two different mortgages. If you use two different lenders, it can cause issues. This is because the building itself may have shared aspects, such as roofing.
Semi-commercial mortgage rates
Semi-commercial mortgages are usually offered up to 75% loan to value. Although the mortgage would be semi-commercial, it’s still treated as a commercial mortgage. As a result, lenders will assess your business plan in relation to commercial space. If you don’t plan to run a business from the property yourself, 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 only aim is to invest. If your aim is to occupy either the residential or commercial space, 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 longer 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 semi-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.