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        Updated: April 20, 2024

        Semi Commercial & Mixed Use Mortgages

        Need a semi commercial mortgage? Mixed use deals are now more common than you might think! Find out the rates & how to get one in our expert guide!

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        We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different types of commercial mortgages. Ask us a question and we'll get the best expert to help.

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        No impact on your credit score

        If you’re looking to purchase a property that will have both residential and business uses, it’s important that you speak with the right type of lender.

        A semi-commercial mortgage involves a tailored borrowing approach and only certain lenders are capable of arranging such a loan.

        Because there’s only a limited number of options able to create a bespoke arrangement, you need to understand how to find the correct lenders.

        In this guide you’ll learn all about the relevant types of semi-commercial mortgage, what lenders will be looking for in your application, and how to get expert support if you need finance to buy a mixed-use property.

        What is a semi-commercial property mortgage?

        This is a mortgage for a property that will have both residential and commercial purposes. For that reason, it’s sometimes known as a ‘part commercial, part residential mortgage’, or a ‘mixed-use’ mortgage.

        Even if a building is only partially used for a business, and is otherwise residential, the property will require a commercial or semi-commercial mortgage. This means you’ll need to deal with a commercial lender.

        Each lender will have limits on exactly how much of the property can be used for business. This often means at least 40% of the property must be for residential use, but there are lenders who will allow up to 60%.

        Get Started with a Broker

        Maximise your chance of approval with specialist advice from an expert in Commercial Mortgages.

        Why you might use a commercial mortgage for a residential property

        There are plenty of instances in which a semi-commercial mortgage might be an appropriate option for you.

        Some common examples of properties and situations that would require this kind of loan include…

        • Pubs that include living areas
        • Shops with flats above them
        • Takeaways or restaurants with accommodation on top
        • Offices containing flats
        • Bed and Breakfast (B&B), Hotel, or Guest House with living quarters
        • Home-based health or beauty services
        • Kennels for pets that also include living spaces
        • Farms or agricultural property
        • A nursing or care home with residential areas

        A key benefit of this mortgage is that often the business and residential parts can be let out. And, because they are classed as commercial loans, they can be treated more favourably in terms of Stamp Duty compared to a residential buy-to-let (BTL) mortgage.

        Keep in mind that any property will need some designated commercial aspect or floorspace. You won’t be able to purchase a standard residential property and get a semi-commercial mortgage.

        Types of loans that can be used for a mixed-use property

        Each semi-commercial mortgage will be created on a case-by-case basis. This is because there are a lot of factors at play, and many variables that can impact your situation.

        The two main types of commercial mortgages you can apply for are:

        1. Owner-occupier mortgage: this is what you’ll need if you plan on living at the property. So, this is the most common option if you’re operating a business and residing at the same location.
        2. Commercial investment mortgage: if you plan on renting out the residential or business space, you’ll need an investment mortgage.

        Various lenders specialise in different areas and it can be difficult to find one if you go it alone. But the good news is that there are brokers who specialise in semi-commercial mortgages and they have deep working relationships with the exact lenders you need.

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        How a broker can help you

        When looking for lenders able to provide semi-commercial mortgages, assistance from an experienced broker is going to make a world of difference.

        Each lender will have their own preferences on what they will accept or what they deem as a higher risk. All of which could impact the deal and rates on offer.

        Guidance from a skilled broker who has existing relationships with commercial lenders is going to really boost your prospects of getting the best deal available.

        Because each loan is crafted on an individual basis, it’s vital you speak with the lenders willing to offer the best terms for your business’s goals and your personal circumstances.

        The terms and rates can vary wildly between lenders. And, some commercial lenders won’t even consider your application without an introduction from a trusted broker. Just make an enquiry and we’ll put you in touch with a specialist mortgage broker. They can assist you throughout this whole process and get you set up with your ideal arrangement.

        What lenders will want to know about the property

        Certain lenders will have set criteria on the kind of properties they’re willing to provide part commercial, part residential mortgages for.

        Some examples of features that can be taken into consideration include:

        • How the property is divided: this could mean a minimum percentage of the overall square footage must be residential. Usually, 40%-60% must make up the residential portion, but some lenders have property division requirements based around value.
        • Size or agricultural ties: some lenders will consider farms, or only properties of a certain size (e.g. at least 10 acres).
        • Minimum value: the property may need to be worth at least £250,000 for lenders to consider creating a tailored commercial arrangement.
        • Use of the commercial section: different lenders will have rules about what the commercial part of the property can be used for. In most cases, it must be your own business and not someone else’s. Some may also exclude industrial uses of the property, for example – depots, storage of scaffolding, mechanical garages.
        • Property planning classification: the property may have to have a residential planning classification.

        Using a specialist mortgage broker means that they’ll be able to get your application in top shape and introduce you to the most suitable lenders. Using a broker who knows this market means they can find you the lenders willing to create a bespoke mortgage that’s competitive and suits your property needs.

        How to get the best commercial rates

        The range of deals and exact rates you’re eligible for will depend on the strength of your application and the lenders you approach. Getting set up with a commercial mortgage can involve plenty of hoops to jump through. Some areas will be similar to residential loans, but there are a number of key differences.

        The main areas lenders will want to look at and evaluate will include:

        Your personal and business income:

        Your affordability calculations will use a different format than a standard mortgage.

        Lenders will look at both your individual income and the business’ projected revenue. This is done to make sure it’s high enough to cover the loan.

        There’s no strict formula used, but commercial lenders will usually look at earnings before interest, depreciation and amortisation (EBITDA).

        This is the method used because it’s a decent indicator of your company’s overall financial performance.

        Essentially, it’s a useful shortcut for calculating your projected cash flow to make sure you can keep up with repayments.

        If your company’s performance doesn’t look strong enough, some lenders will allow you to declare other income or assets as part of your affordability assessment.

        Business track record and investment potential:

        Often, you’ll have to prove the viability of your business.

        This could involve demonstrating your experience in that sector, or showing records of past performance.

        Lenders may also want to know how long you’ve been trading and for, or for you to demonstrate sound knowledge of any business risks in your field.

        If it’s an investment property, lenders will want to ensure a realistic prospect of positive returns.

        Along with proving your track record and/or future plans, lenders will expect a certain amount of rental coverage.

        This will be in the region of 190% for business premises or 130% for a buy-to-let (BTL). But, it can be possible to find lenders willing to accept a range closer to 110-125%.

        There are also lenders who’ll be comfortable dealing with you if you’re a first-time investor or just starting a business.

        But, they’ll want to see evidence of strong projections and a solid business plan.

        Deposit and loan-to-value (LTV):

        The deposit will typically be similar to the requirements for any other commercial mortgage.

        So, there’ll be an expectation for you to place a deposit in the range of 20-40% of the property’s value.

        However, this figure will vary based on your perceived risk and whether you opt for an owner-occupier or commercial investment mortgage.

        Requirements for an owner-occupied mortgage will often have a maximum LTV ratio of 80%.

        Whereas investment mortgages typically offer a lower cap of around 75% LTV.

        There are methods of getting a higher LTV, such as using other property or assets as collateral security.

        Your credit score:

        Each lender will have their own credit requirements and they’ll assess your commercial mortgage application on an individual basis.

        Nevertheless, it’s worthwhile downloading all your credit reports and getting your broker to help evaluate where you currently stand.

        Some lenders will only want to deal with you if you have a spotless credit rating, whereas others won’t have a problem dealing with bad credit applicants.

        Speak with a semi-commercial mortgage specialist

        Every semi-commercial mortgage will be arranged on an individual basis. So, it’s crucial that you speak with the lenders willing to accommodate your individual circumstances and offer you the best rates available.

        We offer a free advisor-matching service, which means we’ll assess your needs and then pair you up with your ideal commercial mortgage broker. Their expertise and industry contacts provides them with the ability to introduce you to the right semi-commercial lenders from day one.

        Just call 0808 189 0463 or make an enquiry and we’ll arrange a free, no obligation chat between you and a commercial mortgage specialist today.

        Ask A Quick Question

        We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different types of commercial mortgages. Ask us a question and we'll get the best expert to help.

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        Pete Mugleston

        Pete Mugleston

        Mortgage Expert, MD

        About the author

        Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

        Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.