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When applying for a semi-commercial mortgage, understanding the factors that influence the interest rate you’re offered can make a big difference. Whether you’re investing in a retail unit with flats above, an office block with a residential element, or a mixed-use property for your own business, knowing what drives rates helps you plan more effectively.
In this blog, we explore the key factors that lenders consider when pricing semi-commercial mortgages and how you can position yourself to secure the most competitive rate.
1. Loan-to-Value (LTV) Ratio
One of the biggest determinants of your interest rate is the loan-to-value (LTV) ratio. This is the percentage of the property’s value that you’re borrowing. A lower LTV means you’re putting down a larger deposit or keeping more equity in the property, which reduces the lender’s risk—and in turn, usually earns you a better rate.
Typical guidance:
- LTVs up to 75% are common for semi-commercial deals.
- The best rates are usually reserved for LTVs of 65% or lower.
If you can reduce your LTV by contributing more equity or negotiating a favourable purchase price, you may qualify for a lower rate.
2. Property Type and Commercial Usage
The type of property and the commercial element it contains will significantly influence your rate. Lenders assess:
- The nature of the commercial tenant – Offices, shops, and professional services are considered low-risk. Pubs, takeaways, and nightclubs are higher-risk.
- The split between residential and commercial use – Properties with a higher residential proportion may benefit from more favourable pricing.
- Location and resale potential – Properties in strong rental areas with good resale value are typically seen as safer.
Mixed-use properties with stable, long-term tenants in desirable locations are the most attractive to lenders.
3. Tenant Quality and Lease Terms
Lenders often assess the quality of the commercial tenant. Factors they consider include:
- Length of lease – Longer leases (5+ years) provide stability in the rental income.
- Tenant covenant strength – A well-known or financially strong tenant adds to the security.
- Vacancy risk – If the commercial unit is vacant or let on a short-term basis, lenders may price the risk higher.
If you’re buying an investment property, securing a long-term lease with a reputable tenant can improve your mortgage terms.
4. Your Experience as a Borrower
Many lenders will offer better terms to applicants with proven experience in:
- Managing mixed-use properties
- Operating a business from commercial premises
- Property investment or development
If this is your first semi-commercial property, expect more scrutiny. But with the right broker, like Advocate Finance, your case can still be presented positively.
5. Credit Profile and Financial Strength
A strong credit history is vital. Lenders will look at:
- Personal credit score
- Business credit (if applicable)
- Outstanding liabilities
- Income and affordability
- Recent bank statements and accounts
The more transparent and robust your financial documentation, the more confidence a lender will have when pricing your mortgage.
6. Purpose of the Loan
Whether you’re buying, refinancing, or capital raising, affects the risk profile of the loan:
- Purchases at low LTVs tend to get the best rates.
- Refinancing with equity release can be seen as higher risk.
- Owner-occupied premises are sometimes more favourable than investment properties.
Make sure to clearly outline your plans, particularly if there’s an element of development or change of use.
7. Type of Interest Rate Chosen
Choosing between fixed and variable interest rates also affects what you’re offered:
- Fixed rates offer stability and are popular for long-term security.
- Variable rates can start lower but carry the risk of increases with market changes.
Discuss your options with a broker to understand what works best for your circumstances and risk appetite.
Final Thoughts
Semi-commercial mortgage rates are shaped by a combination of property features, borrower strength, and lender preferences. By improving your profile and understanding what matters most to lenders, you can increase your chances of securing a better deal.
For a full breakdown of what’s currently available and how rates are structured, visit our Semi-Commercial Mortgage Rates page.
If you’d like tailored advice, get in touch with Advocate Finance. Our experts can guide you through your options and help secure a rate that suits your goals.
Speak to Advocate Finance today and find the right semi-commercial mortgage for your next investment.
