Understanding Semi-Commercial (mixed use) Mortgages: A Guide for Investors

A semi-commercial mortgage is a type of mortgage secured on a property that combines both residential and commercial usage. A semi-commercial property combines both a commercial use element and a residential element. A good example would be a retail unit on the ground floor with a residential flat above.
In this article, we will delve into the key aspects of semi-commercial mortgages, including what they are, what types of properties qualify, the advantages of using a commercial mortgage broker, why they can be a good investment, and the types of lenders who provide financing for such properties.

What is a Semi-Commercial Mortgage?

A semi-commercial mortgage is a loan specifically designed for properties that have a mixed-use element, combining both residential and commercial components. These mortgages are tailored to meet the unique requirements of borrowers who wish to invest in property that generates an income from both residential tenants and commercial tenants.

Semi-commercial mortgage rates are cheaper than commercial mortgage rates but more expensive than pure residential mortgage rates.

Types of Properties that Qualify as Semi-Commercial:

Properties eligible for semi-commercial mortgages can vary but typically include:

• Retail units with one or more flats above
• Restaurants and pubs with self-contained residential accommodation
• Professional practices such as doctors and dentist practices with residential accommodation on the same freehold

Essentially any property which has both a commercial element and a separate access residential element will be classed as a semi-commercial property.

What is the lending criteria for semi-commercial mortgages?

• 3 to 25 years mortgage term
• Interest only and repayment options
• Typically, 2,3- or 5-year fixed rates or Bank of England base rate trackers
• Up to 75% loan to value
• Loan from £150,000 with no maximum

Advantages of Using a Commercial Mortgage Broker:

Engaging a commercial mortgage broker can provide numerous benefits for borrowers seeking semi-commercial mortgages, including:

Expertise and market knowledge: Commercial mortgage brokers specialize in this niche market and have extensive knowledge of the lenders, products, and criteria involved.

Access to multiple lenders: Brokers work with a wide network of lenders, giving borrowers access to a broader range of financing options.

Tailored advice and solutions: Brokers analyse a clients unique circumstances and requirements to provide personalized recommendations and secure the most suitable mortgage terms.

Time and effort savings: Brokers handle the complex mortgage application process on your behalf, saving you time and reducing stress.

Is investing in Semi-Commercial Property a Good Investment?

Investing in semi-commercial properties can offer several advantages, such as:

Diversification: Owning a property that generates both residential and commercial income provides a diversified revenue stream, potentially increasing stability and reducing risk.

Higher rental income potential: Commercial units generally yield higher rental returns compared to purely residential properties, enhancing the overall investment yield.

Potential capital growth: Well-located semi-commercial properties can benefit from both residential and commercial market growth, potentially leading to increased property values over time.

Lenders that Offer Semi-Commercial Mortgages:

Various types of lenders are willing to provide financing for semi-commercial properties, including:

High street banks: Traditional banks often offer semi-commercial mortgages, especially for borrowers with a strong credit history and who have existing commercial property ownership.

Specialist commercial only lenders: Certain lenders focus specifically on providing mortgages for commercial and semi-commercial properties, offering flexible criteria and tailored products. Bridging finance providers: Bridging loans can be an option for short-term financing to bridge the gap until a permanent mortgage can be arranged for a semi-commercial property. The same can be said for clients wishing to buy semi-commercial property who then plan to change the commercial element o residential under permitted development planning rules.

Semi-commercial mortgages by Fox Davidson

Semi-commercial mortgages are a flexible financing option for properties that combine residential and commercial elements. Engaging the services of a commercial mortgage broker such as Fox Davidson can greatly assist borrowers in navigating the complexities of this specialised market. By understanding the unique benefits and seeking the right lenders we advise investors on how they can capitalise on the potential returns and diversification offered by semi-commercial property.