Semi-Commercial mortgages are designed for properties that have both commercial and residential elements, often referred to as mixed-use. Examples of mixed-use properties include:
- Commercial units with flats
- Guest homes that are owner-occupied
- Pubs with self-contained accommodation
- Buildings with self-contained offices and flats
Who can get a semi-commercial mortgage?
If you are looking to purchase a mixed-use property you will need a semi-commercial mortgage. The ratio of commercial to residential has no bearing on the loan required, but this can affect the rates offered. Even if the property was 10% commercial and 90% residential, a semi-commercial mortgage would still be required.
Experience requirements vary between lenders, typically lenders will want to see 12 months BTL property experience, some lenders seek like for like experience. Your broker will be able to advise funding options for your personal circumstances.
What is the attraction of Semi-commercial properties?
The major lure for most investors is the increased yields available through semi-commercial investments. In many cases, the rental yield on the commercial aspect is almost twice as much as would be possible through a standard residential buy to let.
Additionally, semi-commercial investments carry less risks than those associated with one tenant properties. The risk of total loss of rent is significantly reduced where there are multiple tenants in situ.
The other major advantage is that semi-commercial properties are exempt from the 3% stamp duty surcharge. This gives them a lower transaction cost when purchasing, when compared to residential investment properties.
Semi-commercial mortgage rates
Semi-commercial mortgages typically cover up to 75% of the loan. Lenders will want to assess the serviceability of the loan. This means, they will assess your business plan in relation to the commercial space.
If you don’t plan to run a business from the property yourself and the goal is to lease the commercial unit, lenders will want to see a financial forecast for expected rental returns. The nature of the business will also have an impact on available rates.
Typical rates and fees:
- Rates from 2.5% above bank rate
- Lender arrangement fees from 1.5% – 2% of the mortgage amount
- Mortgages terms from 2-30 years
- Repayment and interest-only options available
What are the timescales for implementing a semi-commercial mortgage?
On average, semi-commercial mortgages complete within 6 to 12 weeks from application. Time scales vary depending on the complexity of the case. You can speed up your application by proving all required documentation to your broker upfront.
What documents do I need to provide?
- 3-6 months personal bank statements
- 3-6 months business bank statements (for owner-occupied applications)
- 2 years accounts (for owner-occupied applications)
- A copy of any leases or ASTs (for commercial investment applications)
- Assets, liabilities, income & expenditure information
- Proof of ID
To explore semi-commercial mortgage options speak to John or Michelle in our commercial team.