A semi-commercial property is very common. It’s whereby a residential property and commercial property have merged. Most retail stores have an ‘upstairs’ which is occupied by tenants. Many high-rise office buildings have residents living on the lower floors and offices being used on the upper floors. But how do mortgages apply?

What is a semi-commercial mortgage?

Quite simply, they are mortgages that are designed for properties that have a merge of residential and commercial elements. As you can imagine, the list of properties that this applies to is very diverse. There can be any number of mixtures of business, leisure, living spaces and commercial usage in one property. A semi commercial mortgage is uniquely designed for this

What are Semi-commercial property types?

These types of property that qualify for this type of mortgage are very varied.

• Offices
• Gyms
• Hotels
• Retail Stores
• Condos
• Apartments
• Bars
• Kennels

The list could go on and on. Anything that is a residential property and a commercial property, it will fall under this type of loan category. As long as there are tenants, homeowners, and business owners and companies operating inside one property, and plan on investing in such a property, this is a great option for funding your plans.

How can I obtain a mortgage for a mixed-use / semi-commercial property investment?

These types of loans can only be given by a commercial lender. So don’t bother going to a residential property lender as they will direct you to the former. They will begin by calculating the potential income of the collective rent of all the residential properties first. As businesses can come and go in a matter of months, they would want to know the long-term wealth prospects of the property by doing this.

They will then set about, doing the same for the commercial portion. They will include the buy-to-let potential profits which could be largely different from the solely tenant opportunitie

What is the eligibility criteria for a semi-commercial mortgage?

As you can imagine this type of property is very complex. There are a lot of things to consider. A mixture of property owners, renters and business owners is a substantial challenge. This is why lenders will usually require you to have some experience. They mainly wish for you to know your way around the buy-to-let portion of the property, as the changing of hands with regard to property inside a larger property, is mired with dangers.

However, the length of experience differs from lender to lender. Some might only want you to have at least 6 months, while others may require a longer stint of property ownership, management and planning. They could ask for as much as 3 years or 5 years in this regard. On the other hand, some lenders will want to assess your personal experience, i.e. hands-on approach to problem-solving, conflict resolution and development for maximum growth potential

What deposit is required?

Usually a 20-30% despot will be fine for this type of property. However, again it’s subject to the lender and also the kind of property. It might be a high-street retail store with just 2 studio apartments above. It might be a shopping mall with many condos and retail stores available. The growth potential will be calculated as well as the overall cost of the property. It might be higher than 30% or it might be lower. The benchmark to aim for is 20%.

Mortgage rates and terms for semi-commercial property

Usually, the loan-to-value will be 70-75%, so there is quite a lot of leeway and availability for funding of your property. The fees for the loan can be 0.75-2% for any amount that is over £1 million. As the larger the loan is the more complex it becomes, lenders will want to cover their end of the work by asking for this percentage in fees. VAT loans are also available and can be 100% of the VAT that is due on the loan.

The terms will be from 5 years to up to 25 years. The merits of the property will always be considered to the individual case. It’s up to you to create a report that is worthy of a great loan. So it’s advisable that you commission a property risk analyst to write a report covering, growth potential, international appeal, upgradability in future, the type of tenant and business owner that would be attracted to the semi-commercial property and what support the property would get from the government if it could show it’s national or regional economic value, etc.

Semi-Commercial Lenders and Mortgage Rates

The interest rate for the loans can be from 2.75% to 3%. The market averages out to offering 2.75% rates for most of the loans offered. Once again, the merit of the property will be considered and it will affect the rates you are offered.

The advantages of using an experienced commercial mortgage broker

It goes without saying that hiring someone who actually knows their way around this kind of property, would bear ripe fruits. You are dealing with a merger of people’s living spaces with busy, loud and exciting retail businesses. It’s a good idea to involve a commercial mortgage broker that has a lot of experience under their belt. You need them to look for the best rate on the market, using their contact and industry knowledge. You are effectively hiring a specialist and they will possess skills that other lending institutions will not.

The LTV rate could be 70% or it could be as high as 85%. If you have someone negotiating with prowess and skill, they can get you the maximum. In some cases, you could be given a special one-off rate.

Mixed-use semi-commercial properties are complex and the potential for stepping into a hazard is always there. Contact us today if you’d like to know more about what we do and how we can help you