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Getting started with Semi-Commercial mortgages
Semi-commercial or mixed-use property consists of residential and commercial elements and is a fantastic asset to any property portfolio. Due to the combination of property types, these properties usually require a semi-commercial mortgage provided by a commercial mortgage lender.
The best of both worlds, semi-commercial property investments attract higher yields than traditional residential buy to let property. But what makes semi-commercial such a popular investment choice with landlords is that it’s exempt from the 3% stamp duty surcharge, significantly reducing purchase costs.
To find out more about mortgaging or refinancing semi-commercial property, keep reading! If you have questions, our team of specialist commercial brokers have years of experience sourcing finance for mixed-use property and will be happy to help.
Everything you need to know about semi-commercial mortgages
What properties are classed as semi-commercial?
Mixed-use property consists of a commercial unit and living accommodation. This includes a wide variety of property types, such as:
- Shops with flats above
- Restaurants/takeaways with flats above
- Offices with flats above
- Pubs with self-contained living accommodation
- Holiday parks with residential accommodation
- Guest houses with owner’s accommodation
- B&Bs with owner’s accommodation
- Home-based health and beauty clinics
- Hair salons/beauticians with flats above
- Garden nursery business with a house attached
- Boarding kennels and cattery businesses with living accommodation
Who can get a semi-commercial mortgage?
Semi-commercial mortgages are available to individuals, partnerships, Limited Liability Partnerships (LLPs), Limited and Trading Limited Companies.
What experience do I need for a semi-commercial mortgage?
For investment mortgages, your landlord experience may impact the rates you can access for a mixed-use mortgage. To secure the best rates, lenders will want more than a year of experience letting commercial property or two years of experience letting more than one buy to let. Some lenders will consider first-time commercial investors, but rates may be higher, or you may need proof that your income could cover the mortgage repayments.
How are semi-commercial mortgage applications assessed?
Commercial vs. residential ratio
Lenders have different criteria depending on the ratio of commercial to residential space.
For example, if the residential element is over 50% of the total property, a lender may insist you take a buy to let or residential mortgage (depending on whether you’re letting it out or living there yourself).
Similarly, if the vast majority is commercial, or there’s only one entrance to the whole property, you may need a full commercial mortgage. Our expert commercial team can help you determine what will be best for the property in question.
Investment or owner-occupier?
Semi-commercial mortgages can be for investment, where you, the landlord, let out commercial and residential units, for example, a shop with flats above. Or, if you intend to live in the residential element and use the commercial unit to run your business, you can mortgage a mixed-use property as an owner-occupier, for example, a B&B with owner’s accommodation. Whether you’re letting out or occupying the property determines how lenders assess the viability of the mortgage. If you’re renting out the property, the rental income of all the units will need to cover 125% - 140% of the mortgage repayments to pass affordability stress tests. You can find out more about how commercial investment mortgages work here.
If you and/or your business will occupy the property, the lender must be satisfied that your business generates enough profit to pass affordability thresholds and repay the mortgage. Our page on commercial owner-occupier mortgages will tell you everything you need to know about how this works.
How much can I borrow with a semi-commercial mortgage?
Most lenders' minimum loan size for semi-commercial property is £50,000, and maximum loans are £25 million for two to 30-year terms.
Loan to Value (LTV)
Typically, lenders allow you to borrow up to 75% loan to value (LTV) on semi-commercial property. Lender criteria on property types and affordability calculations can restrict the LTV.
How much are semi-commercial mortgage rates?
Generally, semi-commercial mortgage rates are not as high as fully commercial mortgage rates but are still higher than standard residential property mortgages due to the complexity of the properties. Typically, rates start at about 2.5% above the Bank of England Base Rate. Depending on the lender, whether you’re an investor or owner-occupier may also impact the cost of a mixed-use mortgage, with owner-occupier mortgage rates typically a little cheaper. Lenders provide capital repayment and interest-only term options, with some able to offer part and part options.
Frequently asked semi commercial questions…
Can I live in the residential part of my semi-commercial property?
Yes, but it will mean the FCA regulates your mortgage. All this means is fewer lenders will consider your application. We recommend you speak to our expert team for guidance on this process.
Do I need a mixed-use mortgage to run my business from home?
Mostly, no. Unless you’re making significant structural changes to your home, operating a guesthouse-type enterprise or a business that takes up a large proportion of your property, your standard residential mortgage will be suitable. If you’re unsure, speak to our team.
How long do semi-commercial mortgages take?
How long any mortgage takes depends on many factors, including the case's complexity and how quickly everyone gets their paperwork back. However, we’d usually expect a semi-commercial purchase case to complete in six to 12 weeks from the point of application.
What documents do I need for a mixed-use mortgage application?
The documentation you’ll need for a semi-commercial mortgage application depends on the lender and the case. As a general rule, you’re likely to need the following:
- 3-6 months personal or Limited Company bank statements
- 3-6 months of business bank statements (for owner-occupier applications)
- 2-year record of accounts (for owner-occupier applications)
- Details of ASTs or leases (for investment applications)
- Record of your background property portfolio
Our team of commercial brokers will know which lenders require what documentation, so will help collate and prepare everything to help with a smooth application process.
Variable or fixed-rate mortgages
You can get either variable or fixed-rate mortgages for mixed-use property. Our expert team will be able to discuss which is the best option for you based on your investment plans and individual circumstances.
Semi-commercial mortgage fees
Mortgages for semi-commercial property come with additional fees that you’ll need to factor into your overall purchase or remortgage plans. These will likely include a lender arrangement fee (1-2% of the loan amount), valuation fee and legal fees.