Semi-Commercial Mortgages

Semi-Commercial Mortgages Explained

Semi-commercial mortgages are property-backed loans specifically tailored for properties that blend both residential and commercial components. These mortgages serve various purposes, including property acquisition and refinancing, and are typically facilitated by commercial mortgage lenders, following a structure akin to commercial mortgages.

Properties Falling Under Semi-Commercial Category

• The umbrella term 'semi-commercial' encompasses a broad spectrum of properties featuring both commercial and residential segments. Any property housing both commercial space and living accommodation falls under this classification.
• Some lenders offer reduced rates for semi-commercial properties compared to fully commercial ones. In such cases, specific ratios of residential to commercial space may be required to secure the lower rate.
• Properties with single access points, limiting occupancy to a single tenant or business owner, may not qualify for semi-commercial status.
• Each semi-commercial or mixed-use property is unique, and eligibility is assessed on an individual basis. However, as a general guideline, the following features are often available:
  1. Up to 75% Loan to Value (LTV).
  2. Options for repayment or interest-only structures.
  3. Competitive rates starting from 1.25% above the Bank of England rate.
  4. Borrowing capacity ranging from £25,000 with no maximum loan limit.
  5. Flexible terms spanning 5 to 25 years.
  6. Consideration of all property types based on individual merits.
  7. Availability for semi-commercial investment or owner-occupied loans.
  8. Consideration of adverse credit situations.

Lenders Offering Semi-Commercial Mortgages

Several categories of lenders cater to semi-commercial properties:

1. High Street Banks: Typically offer competitive rates but maintain strict criteria and affordability rules. They prioritize strong financial performance, long leases, and clean credit histories.
2. Challenger Banks: More flexible than high street banks, with leniency towards minor adverse credit and shorter leases. Rates have become increasingly competitive over the years.
3. Specialist Independent Lenders: Offer the highest flexibility but charge higher rates. They accept heavier adverse credit, shorter leases, and relaxed affordability rules. Maximum loan-to-value ratios usually range from 65% to 85% of the property value.

Navigating semi-commercial mortgages requires a tailored approach, considering the property's unique features and the borrower's specific requirements.