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If you’re considering investing in a semi-commercial property, understanding how lenders assess your mortgage application is key. Whether you’re looking at a retail unit with a flat above, or a larger mixed-use investment, knowing what lenders prioritise can make a real difference in securing the finance you need.
What is a Semi-Commercial Property?
A semi-commercial property is one that combines both residential and commercial elements. Typical examples include a shop with flats above, a café with accommodation, or even a mixed-use building with multiple residential and commercial tenants. These properties can offer higher yields but come with more complex lending criteria.
1. Property Type and Usage Breakdown
Lenders will first examine the structure and layout of the property. They’ll want to know:
- What percentage of the property is commercial versus residential
- Whether the commercial element is vacant or tenanted
- What type of business occupies the commercial unit
Properties with stable, long-term tenants in the commercial unit are generally more attractive. A property with 50% or more residential use may even qualify for more competitive lending terms.
2. Commercial Tenant Strength
The strength and nature of the commercial tenant plays a big role. Lenders ask:
- What business is operating from the premises?
- Is there a lease in place, and how long is left on it?
- Is the tenant classed as ‘essential’ / recession-proof such as a Pharmacy, or classed as an Investment Grade?
A well-known franchise, solicitor, or pharmacy is seen as more stable than a new startup or takeaway with a short lease.
3. Borrower Experience and Profile
Your background will also be assessed. Lenders consider:
- Your experience with property investment
- Previous mortgage or landlord history
- Personal and company credit profiles
4. Rental Income and Affordability
The lender will look at the combined rental income from both parts of the property. They’ll assess:
- Is the income sufficient to cover the mortgage interest and repayments?
- Is there enough rental demand in the area?
- Are the leases suitable from a lender’s perspective?
Some lenders apply a stress test similar to residential buy-to-let mortgages, while others focus more on the commercial income stream.
5. Property Valuation and Marketability
The property’s value and how easily it could be sold or let are also important. Surveyors will consider:
- Location and local demand for both commercial and residential space
- General condition and potential resale value
- Comparable properties in the area
If the property is in a prime location and in good condition, it’s easier to obtain favourable lending terms.
Final Thoughts
Each lender has slightly different criteria, but they all want to see a secure investment that is likely to generate income and retain value. Preparing a strong application with supporting documentation, tenant information, and a clear understanding of the property’s use will put you in a better position.
At Advocate Finance, we specialise in semi-commercial mortgages and know how to position your case for success. Whether you’re buying your first mixed-use property or refinancing an existing one, we can help navigate lender requirements with clarity and confidence.
