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Mortgages for Semi-Commercial / Mixed-Use Properties

Welcome to Advocate Finance, your trusted partner in securing semi-commercial and mixed-use property mortgages!

As established mortgage brokers, we understand the unique needs of property investors and business owners, and we are here to provide tailored financial solutions that help you achieve your goals. Whether you are looking for a semi-commercial / mixed-use property mortgage, loan or refinance, we cover all aspects to ensure your success.

What we cover on this page

The Differences Between Semi-Commercial / Mixed-Use Properties

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.

This blend or properties provides multiple income streams and can be a lucrative investment.

What is a Semi-Commercial / Mixed-Use Property Mortgage?

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.

Key Features: Semi-Commercial / Mixed-Use Mortgages

  • Mortgage Range: 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).
  • Standard BTL Mortgages: Loan to values below 50% could be eligible, benefitting from lower interest rates.
  • Mortgage Term: 1 to 30 years.
  • Payment Options: Interest only or capital repayment.
  • Purpose: Purchase, refinancing, or capital raising for any purpose.
  • Income Requirements: No minimum outside income; all income types considered.
  • All Credit Histories: All credit histories, from high net worth to credit repair.
  • All Applicant Types: Individuals and corporate (Ltd Co’s).
  • All Property Tenures: Freehold and leasehold (no minimum term).
  • All Residential Tenants: Working, students, and LHA benefits accepted.
  • All Residential Tenancies: From AST to corporate leases.
  • All Business Tenants: No restrictions on industry or sector.
  • All Business Tenancies: Fully repairing leases or licences.
  • EPC-Enhanced Products: Available for energy-efficient properties.

The Importance of the Residential / Commercial Split

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 ratio of residential to commercial space significantly impacts the mortgage terms and lender selection. This split can be measured by property value or total area, influencing the loan-to-value (LTV) ratio and interest rates.

Steps to Securing a Semi-Commercial Investment Mortgage

Step 1
Initial Consultation with Mortgage Broker

Begin with a consultation with one of our friendly mortgage brokers to discuss your investment goals, property details, and financial situation.

We will assess your needs and recommend suitable finance options.

Step 2
Loan Application

We will submit a detailed loan application, including financial statements & property details etc. Our broker team will guide you through the documentation required by lenders.

Step 3
Property Valuation

A professional valuation will be conducted to determine the property's market value, including both residential and commercial elements. This is a critical step in the mortgage application process.

Step 4
Approval, Legal & Funding

Once approved, solicitors will be instructed to carry out any legal formalities. This can be as quick as a week (if Title Insurance is used on refinance cases). Once this stage is completed funds will be released.

The valuation methodology is an important factor!

Understanding this methodology is crucial as it affects the overall property valuation and the amount you can borrow. 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 mortgage brokers 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.

Single Tenure ValuationAggregate/Break-Up Valuation
This method considers the property as one unit, combining both residential and commercial elements. It is often used for properties with a balanced split between residential and commercial spaces.This method values each element separately, then combines the values. It can be advantageous for properties where one element significantly outweighs the other in terms of value or size.

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.

Benefits of Semi-Commercial / Mixed-Use Mortgages

Advantages of Semi-Commercial
Disadvantages of Semi-Commercial

Overall Yield and Income Sources:

Semi-commercial mixed-use properties typically offer higher overall yields compared to standard buy-to-let investments. This is due to the dual income streams from both residential and commercial tenants. Additionally, the commercial element often commands higher rental income, which can enhance the property’s profitability.

Interest rates:

These tend to be higher than for pure residential buy-to-let mortgages.

Lower Risk with Diverse Tenants:

Having both residential and commercial tenants can reduce the risk associated with vacancies. If one unit becomes vacant, the income from the other units can help cover costs, providing a safety net for investors. However, you tend to have longer-term tenants in the commercial element and there is the option for one tenant to occupy both units.

Valuation:

Commercial valuations are required, which can be more expensive than residential valuations.

Potential for Capital Growth:

The flexibility to convert commercial spaces to residential units under permitted development rights can increase the property’s value. Investors can leverage these opportunities to maximise capital growth over time.

Tenants:

Commercial tenants can take longer to find but, on the whole, they stay longer as tenants than residential.

Stamp Duty:

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.

 

Why Choose Advocate Finance for Semi-Commercial Mortgages?

Expertise and Experience:

  • At Advocate Finance, we specialise in providing brokering services in semi-commercial and mixed-use property mortgages.
  • Our team of experienced mortgage brokers have extensive knowledge of the unique challenges and opportunities associated with these types of properties. We understand the intricacies of the market and can provide expert guidance tailored to your specific needs.
  • If speed is essential to the transaction, our advisers will prioritise your case to ensure deadlines are met.

 

Tailored Financial Solutions:

  • We recognise that every client has unique financial goals and requirements. Our approach is highly personalised, ensuring that we offer tailored financial solutions that align with your investment strategy. Whether you are looking to purchase, refinance, or raise capital, we have the right mortgage product for you.

 

Competitive Fee Structure

  • We offer a FREE assessment  with one of our mortgage brokers
  • We have a no upfront fee policy
  • Our typical fee for 99% of our clients is capped at only £395!
  • Want to read what our customers say? Read our testimonials Google reviews

 

Comprehensive Range of Services:

  • Advocate Finance offers a wide array of mortgage products and services. From bridging loans and refurbishment loans to long-term financing options, we cover all aspects of property finance. Our comprehensive service range means you can find all the financial solutions you need under one roof.
  • Efficient and reliable – Known for our rapid response and dependable service, we ensure timely financial solutions. Our experienced team of mortgage brokers provide professional advice to help you navigate your bridging finance options, ensuring you make well-informed decisions.

FAQs on Semi-Commercial / Mixed-Use Property Mortgages

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

Properties that qualify for semi-commercial mortgages include buildings with both residential and commercial elements, such as flats above shops, mixed-use buildings, and properties intended for both living and business purposes.

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.

Interest rates for semi-commercial investment mortgages vary based on factors such as the loan amount, loan-to-value ratio, and the borrower’s credit profile. Typically, rates range from 3% to 7% per annum.

Some lenders may impose early repayment charges. It’s essential to understand the terms of your mortgage agreement, including any penalties for early repayment.

Speak to one of our Advisers today for a free consultation.

As a mortgage broker, we have built up relationships with various lenders, in turn they constantly update us with any criteria or rate changes, meaning we can actively source the best mortgage deal available to your circumstances.

We can also refer cases over to the lenders before application giving them the whole picture, to see if your case is suitable for them; saving you time and money.

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.

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Mortgages for Semi-Commercial / Mixed-Use Properties

Our expert team of mortgage brokers are here to guide you through every stage of the process.