Key takeaways
- A semi-commercial mortgage is for a building that mixes commercial and residential use, like a shop with a flat above.
- Lenders usually treat a property as semi-commercial when more than 50% of the floor space is residential.
- Investors and business owner-occupiers are assessed differently.
- Applications are more detailed than for residential mortgages and fewer lenders offer them.
What is a semi-commercial mortgage?
A semi-commercial mortgage helps you buy a property that combines commercial and residential floorspace in the same building. Common examples are a retail unit with a flat above, a pub with owner accommodation, or a mixed-use office and apartment block.
Lenders often treat a property as semi-commercial when the residential element makes up more than 50% of the total floor space. Below that, it’s usually classed as fully commercial. That distinction changes the product, rates and maximum loan to value (LTV) you can get.
You’ll also hear these kinds of properties called “mixed-use”, as well as semi-commercial. In almost all cases, they mean the same thing.
For the bigger picture on commercial mortgages, you can read our commercial mortgage guide.
Who uses a semi-commercial mortgage?
Two kinds of borrower tend to use these mortgages and the rules differ for each:
- Property investors. Experienced landlords or portfolio investors, including those using a limited company or Special Purpose Vehicle (SPV). Lenders assess affordability against rental income from both parts of the property. Remortgaging to release equity is a common use.
- Business owner-occupiers. These are trading businesses buying premises with a residential element, like a pub with living quarters or a convenience store with a flat above. Lenders assess affordability against the business’s financial performance (EBITDA), not the potential rental income.
How semi-commercial mortgage rates are structured
Rates are usually available as fixed or variable. A fixed rate gives you a consistent repayment schedule, a variable rate opens you up to movements in interest rates – up or down.
The exact rate you’re offered depends on:
- your loan-to-value (LTV) ratio (i.e. how much you need to borrow on top of your deposit)
- whether the loan is for investment or owner-occupation
- the size of the loan
- in some cases, the property’s Energy Performance Certificate (EPC) rating
Some lenders, including Allica, offer discounts for properties with strong EPC ratings or for larger loans.1
Lenders also consider debt service cover (DSC) – a ratio showing how comfortably your income covers the loan payments. The requirement can differ between semi-commercial investment and owner-occupied loans, and again from purely commercial mortgages.
For more on how pricing works, see our guide to commercial mortgage rates.
Documents needed for a semi-commercial mortgage application
Each lender and application is unique, but you’ll typically need:
- Two years of financial accounts, including a detailed profit and loss account and balance sheet
- Up-to-date management accounts
- Three months of business bank statements and personal bank statements for the directors and owners
- Personal tax returns for directors, partners or ultimate beneficial owners
- A debt schedule covering all your existing debts across the business or portfolio
- A proposal summary, which includes:
- your entity structure (for example, an SPV set-up)
- how you’ve calculated affordability
- the background and experience of the directors or partners
- a description of the property
- for investors, a summary of tenant performance over the last 12 months, including voids, arrears and management costs
- A property schedule and a statement of assets, liabilities, income and expenses
- For investors, details of each tenant and lease terms, including rent, start date, break clauses and expiry date
Having all this ready speeds things up. You can read our commercial mortgage application tips for a bit more help.
Frequently asked questions
What types of property count as semi-commercial?
A few examples are a shop with a flat above, a pub or restaurant with owner accommodation, a professional practice with a residential apartment in the same building, or a mixed-use block with commercial space on the ground floor and homes above.
Generally, at least 50% of the total floorspace needs to be residential to qualify as semi-commercial.
Can I remortgage a mixed-use property onto a semi-commercial mortgage?
Yes. Remortgaging is common, especially for investors who want to release equity, switch rates, extend the term, or move from bridging finance onto a longer-term product.
Is a semi-commercial mortgage harder to arrange than a standard residential mortgage?
The process can be more complex and fewer lenders might be available, but it isn’t necessarily harder. If you have a healthy business and a clear proposal for the application, you could have a good chance of securing a semi-commercial mortgage.
How long does a semi-commercial mortgage application take?
There are several stages: indicative terms, a full application, underwriting, a legal offer, valuation, the legal process and completion. There are too many variables to give an exact number, but something around four to six months is reasonable to expect.
Find out more about semi-commercial mortgage finance with Allica
Allica provides commercial mortgages for UK investors and business owner-occupiers, including semi-commercial and mixed-use property finance.
If you apply directly, you’ll have a named relationship manager supporting your application.1
Explore Allica commercial mortgages
1 All lending is subject to status, our lending criteria, and a satisfactory credit assessment. Terms and conditions apply. For more information visit here.
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Disclaimer: This is information – not financial advice or recommendation.
The content and materials featured in this article are for information and education only, and are not intended to take into consideration any particular recipient’s financial situation. The product details referred to are correct at the time of writing. The information does not constitute financial advice or recommendation and should not be considered as such.
