Do I Need A Semi-Commercial Mortgage?
What classes as a Semi-Commercial property?
Any mixed use property that contains both residential and commercial elements is classed as semi-commercial and will therefore require a semi-commercial mortgage. Some examples are:
- Shops with flats above them
- Bed and breakfast style accomodation where the owner is live-in
- Pubs with residence above them
- A Doctor or Dentist Surgery where they professional uses part of their own home
- Holiday Parks where owners/workers live on site
How does a Semi-Commercial mortgage work?
Regardless of the percentage of business vs residential aspect of the property, you will require a semi-commercial mortgage in order to finance it. Most semi-commercial mortgages last between three and twenty five years, although it may be possible to extend it to thirty years in some circumstances. Semi-commercial mortgages can be emulated on both freehold and leasehold properties.
Semi-commercial mortgages are set up like commercial mortgages and will therefore only be offered by commercial mortgage lenders. The maximum loan to value amount for a semi-commercial mortgage is usually 75% and some lenders will impose a minimum loan amount of £75k. For applicants with existing investment properties, some lenders may offer up to 100% mortgage where there is a lot of equity in the existing portfolio.
Types of Mortgage Available
You have the option to apply for either an owner occupier if you plan to live or trade at the property or a commercial investment mortgage, if you’ll be renting the entire property for profit.
You usually have the choice of interest only or repayment mortgages on semi-commercial properties. The interest rates are typically variable, although some lenders offer fixed-rate deals if your property is valued at below £500k.
Variable interest rates are based on a percentage of the Bank of England base rate, similarly to residential tracker mortgages.
Are There Any Exceptions?
Where the residential aspect of the property has its own entirely separate entrance to the property, it is sometimes possible to have a residential and commercial mortgage concurrently, for the relevant aspects of the property.
How can they be a good investment?
A semi-commercial property can be a good investment as they offer the chance for multiple sources of income. You could either choose to rent the entire property or use the business aspect yourself and rent the residential part, or vice versa. Multiple income streams offer better stability, as they one may support the other in turbulent times.
What kind of deposit is required for a semi commercial property?
As the loan to value amount is a maximum of 75%, you will need at least 20-30% deposit in order to secure a semi-commercial mortgage. Your chance of acceptance will improve, the higher the deposit you’re able to offer.
Is a Semi-Commercial mortgage more expensive than a residential one?
Given the complexity of the application process for a semi-commercial mortgage they are more expensive than a residential mortgage. For example, the valuation fee is higher due to a more detailed report requirement. You’re also likely to need separate legal representation, so solicitor fees will be higher than on a standard residential mortgage.
In terms of arrangement fees, 1-2% of the loan amount is usually payable on semi-commercial properties up to the value of £1m.
Is there anything specific that needs to be considered when applying for a Semi-Commercial Mortgage?
Most commercial mortgage lenders will require that semi-commercial mortgage applicants have some property investment experience, or at least, have owned your own residential property for two years or more.
A semi-commercial mortgage is usually secured on the purchase property, however you will need to offer a cash deposit as a percentage of the value. Where you are unable to offer a large enough security deposit, it may be possible to secure some of the value of the property on existing assets, such as other investment properties.
How can a Mortgage Broker Help?
Semi-commercial mortgages are complex and require strong knowledge of the mortgage industry as a whole. Approaching Mortgage Brokers who specialise in commercial mortgages advice will be of significant benefit to those taking on a semi-commercial mortgage, especially if it’s as a first time applicant.
As well as helping you to navigate the minefield of information, Mortgage Brokers have access to the most appropriate deals for your circumstances. They will provide unbiased advice about which lenders are most likely to accept your application, saving you time and money.