In This Article
What is a semi-commercial mortgage?
A semi-commercial mortgage is a mortgage for a property that has both a residential and commercial element to it.
For the property to be predominantly commercial, 60% or more of the floor area of the property must be for commercial use.
If this was the case, this would generally mean a commercial mortgage would be taken to finance the property.
For a semi-commercial property, an example of this would be a retail shop with a residential flat above it.
If the flat was to be occupied by the owner of the building as their main residence, it can make it more of a challenge to get a mortgage on the property.
The reason is, that it is unclear whether it is a residential property or a commercial property.
Many residential mortgage lenders do not allow commercial use and many commercial lenders do not allow residential use. This can make things hard!
There are, however, lenders that can consider finance on this type of property so to speak with a professional mortgage adviser that can tell you your options.
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Are the rates higher on a semi-commercial mortgage?
Interest rates are generally higher for commercial mortgages than they are for residential ones.
This is because the market is smaller for commercial properties so this can mean selling one is often more of a challenge in the event of a repossession.
Semi-commercial mortgage rates are usually similar to those of standard commercial mortgages.
Commercial mortgages are usually on a bespoke basis so products will vary based on the scenario and the building.
A mortgage broker would take time to understand the full situation while searching for a suitable mortgage product.
Are semi-commercial mortgages regulated or unregulated?
Although standard commercial mortgages are not regulated, this can change if the majority of the building is for residential use.
For instance, if you were buying a property to live in as your main home but 20% of the property was a retail unit, this would need to be on a regulated basis. If, however, you were to let the residential part out, this would not be the case.
Although the mortgage would need to be regulated if you plan to live in the building, many residential mortgage lenders do not allow semi-commercial properties, so this does limit the number of mortgages that are available to you.
Some lenders can consider this but they would need a clear understanding of your intentions with the property. An experienced mortgage adviser would be able to give you the advice that you need in this situation.
Can a first-time buyer get a semi-commercial mortgage?
First time buyers can qualify for semi-commercial mortgages. However, most lenders will not lend to first time buyers to buy semi-commercial properties for their residential use.
The majority of lenders that lend to first time buyers for properties to live in will not allow such specialist dwellings. The lenders that will, would need a full understanding of the applicant’s situation post completion.
For example, does the applicant plan to use the commercial element themselves? If so, what will the business activity be taking place on the premises? Is the success of business fundamental to paying the mortgage on the full property or is there other income?
If the applicant does not plan to use the commercial space, who does? What is their business and who will be visiting the property?
Lenders need to be comfortable with the full situation before offering a semi-commercial mortgage. You should talk to a mortgage adviser with experience in semi-commercial mortgages to find out your options.
How much can I borrow on a semi-commercial mortgage?
The amount that a lender will lend on a semi-commercial mortgage will vary upon the application.
Semi-commercial mortgages are bespoke so you the lender will need to know the full details before offering mortgage terms.
However, a common minimum deposit for a semi-commercial mortgage is 25%. Check with your mortgage broker at the time to find out if this is the case or not.
Semi-commercial mortgage lenders change their products and criteria regularly so speaking with an expert mortgage adviser is usually your best bet.
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Can I get a semi-commercial mortgage if I have bad credit?
It may be possible to get a semi-commercial mortgage if you have bad credit.
Not all lenders that offer semi-commercial mortgages will lend to people with bad credit, but luckily, some will.
Bad credit can consist of many different things. For instance, it can come in the form of arrears, defaults, bankruptcies, individual voluntary arrangements, debt management plans and county court judgements.
An experienced mortgage adviser would gain a full understanding of your credit file and your situation.
With this information, they can make a mortgage recommendation accordingly.
Do you need a special mortgage broker to arrange a semi-commercial mortgage?
A semi-commercial mortgage is a specialist product so it would be recommended to find a mortgage adviser with the correct experience.
Not all mortgage advisers will have experience in arranging semi-commercial mortgages so be sure to ask your adviser about their professional background.
A commercial mortgage adviser will likely have more experience with semi-commercial mortgages than a residential mortgage adviser. This is not always the case though hence why asking about your broker’s background is prudent.
If you use a commercial mortgage adviser, they will likely be members of The National Association of Commercial Finance Brokers (NACFB).
Do you get semi-commercial mortgages for buy to let use?
If you plan to rent out the residential space in a semi-commercial property, the mortgage products offered by a lender will usually be just standard commercial mortgage not a buy to let mortgage.
The lender would need to know your intentions with the residential space and the amount of rent it would generate.
This is the same for the commercial part of the building, where your lender will need to know whether you plan to occupy the space yourself or rent it out to a business.
The lender would likely need to know the full details of the business to be comfortable that they would make suitable tenants. The reason they need to do this is that the rent generated is what ultimately pays for the mortgage.
What type of business may operate rate from a semi-commercial property with a semi-commercial mortgage?
There is an unlimited number of businesses that may operate from a semi-commercial property with a semi-commercial mortgage on it.
The type of business that may suit a semi-commercial property will depend upon the amount of space that they need and the commercial unit available.
It is not uncommon for properties with semi-commercial mortgages to contain businesses such as accountants, dentists, physios, hairdressers, beauticians and so on.
If you plan to buy a semi-commercial property to occupy yourself and run your business from it, you should check with the council to find out its permissions.
Not only does your lender need to be happy with who is in the building, but your local council will also need to know too and issue the consents that you need to operate from the building.
Do you get bridging loans for semi-commercial properties?
You can get short-term finance for semi-commercial properties.
The reason a bridging loan may be needed for a semi-commercial is usually that there is urgency in the transaction or the property is not mortgageable.
If you take short-term finance to buy a semi-commercial property, you need to think about your exit strategy. This may be the sale of the asset in the future or a refinance to a long-term loan.
If you plan to refinance in the future, you should check with your mortgage adviser whether you would be eligible for this type of finance when the time comes.
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Conclusion
It is possible to get a semi-commercial mortgage for properties that have both residential and commercial elements.
Semi-commercial mortgages are, however, specialist products requiring expert advice from a professional.
Your mortgage lender will need to know your intentions for both the residential space and the commercial space. You should tell your mortgage adviser the full situation so they can look for a product accordingly.
If you would like I NEED ADVICE to find you a professional mortgage broker that can give you expert advice on semi-commercial mortgages, please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
