What Are Semi-Commercial Mortgages?
As the name suggests, semi-commercial mortgages are intended for any property that doesn’t fall strictly into either the “residential” or the “commercial” category. These are also called “mixed-use” properties. In terms of how they work, semi-commercial mortgages are similar to other mortgage products. However, the approval process can be a little more complex.
How Do Semi-Commercial Mortgages Work?
Here’s a quick overview:
Term and Repayment:
The terms for a semi-commercial mortgage are usually in line with those offered by purely residential or commercial agreements. Payment terms range from five to 30 years. The loan-to-value rate is higher than a standard residential mortgage, so you’ll typically need to provide a deposit of 25% to 35%.
Interest Payments:
When it comes to interest rates, semi-commercial mortgages tend to fall between the two categories. Rates are generally higher compared to residential mortgages, but more competitive than the typical commercial mortgage.
Lender Requirements:
Lenders will take both the commercial and residential aspects into account when assessing your application. You’ll need to supply both personal and business bank statements, as well as two years of tax returns and a copy of your existing portfolio. Because there’s more to consider, the approval process may take longer.
What kind of properties are suitable for a semi-commercial mortgage?
A semi-commercial mortgage is the right choice for any property where people both work and live. Landlords usually earn rental income from both the business and residential aspects. Here are just a few of the most common examples:
A B&B where the owner-operators live on the premises
A pub with staff accommodation on-site
A ground-floor shop or fast-food outlet with a flat above it
An office block that has a residential unit attached
Operating a business from your home doesn’t automatically make the property semi-commercial. If you run a hairdressing sideline or therapy practice from a spare room, for example, the property is still primarily residential.
If a property that has both commercial and residential elements – such as a flat with a shop upstairs – has a single entrance, then it can only be used by one tenant and cannot create multiple income streams. This can disqualify it from being considered semi-commercial, and you may need to apply for a commercial mortgage instead.
Are there any fees on a semi-commercial mortgage?
Yes, you will pay various fees on a semi-commercial mortgage. These typically include:
Legal fees:
You’ll be required to pay both your own legal fees and those of the lender. Each of these can start from around £500.
Valuation fees:
The property will need to be valued before the lender can approve your mortgage. The amount you’ll pay will depend on a number of factors. Valuation fees for semi-commercial properties are generally higher than for residential ones because the valuer has to take more elements into account.
Lender fees:
Arranging the mortgage usually incurs a fee of 1% to 2% of the amount borrowed.
Early repayment:
If you choose to pay off the balance of your mortgage early, you may incur a fee for this. It’s important to check whether this is included in your agreement.
Semi-Commercial Property Finance
Secure tailored funding for mixed-use properties combining residential and commercial elements.
Whether you’re purchasing, refinancing or expanding your portfolio, semi-commercial finance can provide flexible solutions structured around rental income and long-term investment goals.