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Mortgages for Semi-Commercial / Mixed-Use Properties

Mortgages for semi-commercial / mixed-use properties explained:
These are long-term buy-to-let mortgages that provide property investors and landlords with funding in order to allow them to purchase or refinance semi-commercial / mixed-use properties.

This page focuses on buy-to-let investment mortgages for Semi-commercial / mixed-used properties fully let to tenants. However, we can also arrange mortgages for those properties where the residential element is lived in by the applicant and/or an applicant’s business trades from the commercial property. This is classed as a trading business mortgage from a lender’s perspective.

What is a semi-commercial / mixed-use property? The terms “Semi-Commercial” and “Mixed-use” are interchangeable words that both relate to a property that has one tenure (freehold or leasehold) but both residential and commercial units with separate access to each unit. The typical property would be a high street retail property with a flat (domestic property) with its separate entry access above a commercial (non-domestic) property.

The residential element can also be a house in multiple occupation (HMO) or more than one residential flat, so in effect, a multi-unit block (MUFB) above a commercial unit.

Key Features: Semi-Commercial / Mixed-Use Mortgage
  • Typical interest rates and fees – Call our advisers
  • Semi-Commercial Mortgages from £100,000 to £50 million; subject to affordability and credit criteria
  • Loan to values up to 75% (100% with cross charges)
  • Loan to values below 50% could be eligible for standard BTL mortgages, thereby benefitting from lower interest rates
  • Mortgage Term: 1 to 30 years
  • Payments: interest only or capital repayment
  • Purchase / Refinancing / Capital Raising (any purpose)
  • No minimum outside income / All income types
  • All credit histories: High Net Worth to Credit Repair
  • All applicant types: Individuals / Corporate (Ltd Co’s)
  • All tenures: Freehold / Leasehold (no minimum term)
  • All residential tenants: Working, Students, LHA benefits
  • All residential tenancies: AST to Corporate Leases
  • All business tenants: No restrictions on industry/sector
  • All business tenancies: Fully repairing leases / Licences
  • EPC-enhanced products available

The importance of the residential / commercial split of the property

Probably the most significant factor that decides the mortgage lender and terms available is the split between the residential element compared to the commercial part.

Typically, this split between these is measured by the property’s value, but some lenders consider the split by the total area of the residential and commercial units.

The valuation methodology is an important factor in the choice of lender!

The majority of lenders will value the property as one tenure (freehold or leasehold). They will take into consideration the value of the whole property & the rental income that each residential and commercial unit generates.

Our advisers will carefully consider the suitable lenders for your circumstances depending on how much you are looking to raise relative to the value of the property. But the property’s value can differ depending on the valuation methodology the lender instructs the valuer to use. 

With respect to semi-commercial / mixed-use properties, the biggest difference is whether the lender will use a Block value / Market Value or an aggregate/break-up value of the property. If your property’s residential element is the vast majority of the overall value, then some lenders can use an aggregate value that might be more advantageous, or if the loan-to-value is low, then we can source a buy-to-let lender that ignores the commercial valuation altogether, and the interest rate will be considerably lower.

Can I obtain a normal mortgage on semi-commercial / mixed-use property?

If the residential element of the property has been separated onto its own legal title (by creating a long leasehold title) and the commercial remains a freehold then we could source two loans from either same lender or different lenders to provide the funding solution.

The mortgage on the flat would then be a standard residential or buy to let mortgage as opposed a commercial mortgage.

FAQs

It is possible to live in the residential flat and let the commercial unit to a tenant and still obtain a semi-commercial / mixed-use mortgage. 

The only potential issues are

  1. How much area is the residential flat compared to the commercial unit. If it is over 40% it could become a regulated commercial mortgage
  2. The rental income to factor into the mortgage affordability calculation would only be from the commercial property

High Street Banks can provide mixed-use mortgages, but we tend to find that their processes can be slow and the loan to values (LTVs) they offer are limited.

We prefer to work with specialist commercial banks who can offer mortgages that are flexible; provides payments options such as interest only and capital and repayment.

Commercial Banks that operate through intermediaries such as Advocate Finance, also tend to more flexible on the terms of the commercial leases. High Street Banks can require long-term leases to be signed and unless it is a blue chip tenant, it can be difficult to find a tenant prepared to sign a lease for more than 5 years

We do offer bridging loans for semi-commercial properties. These types of loans are short-term and are typically used to bridge the gap between the purchase of a property and the longer-term financing that is needed to complete the purchase. These types of loans can be used for a variety of different property types, including semi-commercial properties, and are often used by investors and developers to acquire and renovate properties. However, the terms and requirements for bridging loans can vary depending on the lender and the specific property.

Yes – We have successfully arranged mortgages for a number of HMO’s above semi-commercial / mixed-use properties.

Yes – We have successfully arranged mortgages for a number of multi-unit properties above semi-commercial / mixed-use properties. These are varied from 6 residential units above a commercial retail shop to a property that consisted of 107 units above 3 commercial units.

Our advisers offer a FREE consultation, so please give us a call or use the “Get in Touch With Us” form at the end of this page.

Advantages of Semi-Commercial

  • Overall yields tend to be higher than standard BTL properties.
  • Multiple sources of rental income from one property.
  • Longer-term tenants in the commercial element.
  • Option for one tenant to occupy both commercial and residential units.
  • Future options to potentially convert the commercial element using Permitted Development rights.
  • The Stamp duty rate for Semi Commercial properties is much lower than the residential stamp duty rate for when the property is let out. Semi Commercial / Mixed Use properties are based on the non-domestic stamp duty rates.

Disadvantages of Semi-Commercial

  • Interest rates tend to be higher than for pure residential buy-to-let mortgages.
  • Commercial valuations are required, which can be more expensive than residential valuations.
  • Commercial tenants can take longer to find but on the whole, they stay longer as tenants than residential.

How can YOU benefit from our advice?

  • If speed is essential to the transaction, our advisers will prioritise your case to ensure deadlines are met.
  • Our Advisers have expert knowledge when it comes to Semi-commercial / Mixed-use Mortgages.
  • We offer a FREE assessment and have a no upfront fee policy. Our typical fee for 99% of our clients is capped at £395
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