Semi-Commercial Mortgages

A semi-commercial mortgage is designed for properties that have both residential and commercial elements, such as a shop with a flat above it. Other examples of semi-commercial properties include:

• Pubs with residential spaces rented out on an AST basis
• Offices with residential accommodation
• Parades of shops with residential flats above

These mortgages are available to property investors or business owners who wish to occupy the commercial portion of the property while renting out the residential section.

What Properties Are Considered Semi-Commercial?

Semi-commercial properties combine both commercial and residential uses. While some properties may have a higher percentage of residential space, they may still require a semi-commercial mortgage. There are exceptions, however:

• If the residential part of the property has a separate entrance that bypasses the commercial area, you may be able to secure separate residential and commercial mortgages for each section, provided the residential space has its own legal title.
• Lenders have varying criteria for classifying semi-commercial and commercial mortgages. Some use a 60/40 rule based on square footage, while others apply it based on the property's value. Generally, at least 40% of the property must be residential, though some lenders may allow up to 60%.

We offer both commercial and semi-commercial mortgages. If you're unsure about which type of mortgage suits your needs, feel free to contact us for guidance and to secure the best rates.

Advantages and Disadvantages of a Semi-Commercial Mortgage

Advantages

• One key benefit of a semi-commercial mortgage is that when purchasing the property, you are exempt from the additional 3% stamp duty surcharge typically applied to second residential properties. This reduces your transaction costs compared to investing in standard residential properties (*always seek professional legal and tax advice).
• Semi-commercial properties can be seen as a safer investment because they typically have multiple tenants. This reduces the risk of the property remaining vacant.

Disadvantages

• Fewer lenders are offering semi-commercial mortgages, which may limit your options when refinancing or purchasing.
• Lenders often consider the strength of existing tenants and the terms of their leases. It's important to ensure that the commercial lease is acceptable to prospective lenders when purchasing a semi-commercial property.
• Lenders may value semi-commercial properties in different ways, typically using methods such as Open Market Value (OMV), Vacant Possession (VP), or 180-day value.