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Semi-Commercial Mortgages: What You Need to Know
A semi-commercial mortgage is a type of mortgage that is used to finance a property with features of both residential and commercial use, also known as a mixed-use property.
This type of mortgage can be used to finance a commercial unit that is attached to a residential property, such as a storefront with an apartment above it, or a live/work space. Semi-commercial mortgages can also be used for properties that are zoned as commercial but have some residential units, such as mixed-use buildings with retail space and apartments.
If you're looking to finance a mixed-use property, you'll need to find a specialist lender that offers semi-commercial mortgages. Not all lenders offer this type of mortgage, so it's important to work with an experienced mortgage broker who can help you find a lender that does.
At Teito, we work with 90+ mortgage lenders, including those that offer semi-commercial mortgages. We can help you find the right mortgage for your mixed-use property and guide you through the application process.
Get in touch with us today to learn more about semi-commercial mortgages and how we can help you finance your mixed-use property.
What to Consider When Applying for a Semi-Commercial Mortgage
When applying for a semi-commercial mortgage, there are a few things that you will need to take into consideration.
- The type of property that you are looking to purchase: You will need to have a clear idea of the type of property that you are looking to purchase, as well as its purpose. This will help your mortgage broker determine which lenders would be a good fit for your needs.
- The location and value of the property: The location of the property is also going to be important when you are applying for a semi-commercial mortgage. The lender will want to know where the property is located so that they can determine if it is a good investment.
- Your trading history: When you are applying for a semi-commercial mortgage, the lender is going to want to see your trading history. This will help them determine if you are a good candidate for the loan.
- The deposit: When you are applying for a semi-commercial mortgage, the lender will also want to know how much money you are willing to put down as a deposit. The larger the deposit, the better chance you have of getting approved for the loan.
- Your credit score: Your credit score is also going to be important when you are applying for a semi-commercial mortgage. The lender will want to see that you have a good credit score so that they can determine if you are a good candidate for the loan.
Do I need a Semi-Commercial Mortgage?
If you are looking to finance a property that has both commercial and residential features, then you may need a semi-commercial mortgage.
This type of mortgage can be used to finance a mixed-use property, such as a shop with a flat above it, or a block of apartments with ground-floor retail space.
Lenders classify commercial and semi-commercial property differently, using either a calculation of square footage percentages or value. If you're not sure if you need a semi-commercial mortgage, it's always a good idea to speak with a mortgage broker who can help you determine which type of mortgage is right for your property.
Generally speaking, these types of mortgages are closer in nature to commercial mortgages rather than residential mortgages, and as such are offered by a smaller number of lenders. The interest rates and fees are also generally higher than for a residential mortgage.
Do I need a Semi-Commercial Mortgage to Run a Business from Home?
If you run your business from home, you may not need a semi-commercial mortgage, depending on the size and nature of your business. If your business does not require you to make any alterations to your home, such as adding a separate entrance or office space, you may also be able to get by with a standard residential mortgage.
However, if your business is large and you have employees, or if you need to make alterations to your home in order to accommodate your business, you will likely need a semi-commercial mortgage.
How Much Deposit Do I Need For A Commercial Mortgage?
The deposit requirements for a commercial mortgage are going to be higher than for a standard residential mortgage. This is because the lender is taking on more risk by lending money to purchase a property that has both commercial and residential space.
As such, you can expect to need a minimum of 20% for a deposit, although some lenders may require more. If you are able to put down a larger deposit, this will improve your chances of getting approved for the loan.
What Are The Interest Rates For Commercial Mortgage?
The interest rates for a semi-commercial mortgage are going to be higher than for a standard residential mortgage. This is because the lender is taking on more risk by lending money to purchase a property that has both commercial and residential space.
As such, you can expect to pay a higher interest rate on your loan. The exact interest rate will depend on the lender and the specifics of your loan.
Is A Commercial Mortgage More Expensive?
Yes, compared to a residential mortgage, a commercial mortgage is going to be more expensive. The reason for this is that commercial mortgages are considered to be a higher risk by lenders, so they charge a higher interest rate to compensate for that risk.
However, the amount that you will pay will depend on a number of factors, including:
- The type of property you are buying
- The location of the property
- The amount of the loan
- The term of the loan
- Your credit score
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How to Qualify For a Commercial Mortgage
Qualifying for a commercial mortgage is generally going to be more difficult than qualifying for a residential mortgage. That’s because commercial property is considered a higher-risk investment, and banks are going to be more conservative when it comes to lending money for it.
To qualify for a commercial mortgage, you’ll usually need to have a deposit of at least 20% of the property value, and up to 40% in some cases You’ll also need to prove that you have a good credit history and enough income to make the monthly repayments.
When it comes to business loans, the lender will also want comfort that you have enough cash flow to cover any unexpected costs, such as repairs or vacancies. As such, you may need to provide financial statements for your business as part of the application process.
A good way to improve your chances of qualifying for a commercial mortgage is to have a clear business plan that demonstrates the potential for profitability. The lender will want to see that your business is likely to be successful in order to feel confident about lending you the money.
Can I Buy A Commercial Property With A Residential Mortgage?
No, you cannot buy a commercial property with a residential mortgage. A commercial mortgage is a specific type of loan that is used to purchase commercial property. Commercial mortgage lenders are different from residential mortgage lenders, and the loans they offer are also different.
Commercial mortgage deals take into account your trading history, business accounts and credit score, as well as the value of the property you’re looking to buy.
Applying for a commercial mortgage is a more complex process than applying for a residential mortgage, so it’s important to make sure you understand the difference between the two before you start your search.
Speak to an Expert
If you’re thinking of buying a property with both commercial and residential space, it’s important to speak to an expert before you start the process. A mortgage broker who specializes in commercial mortgages will be able to give you tailored advice and help you find the best deal for your situation.
They will also be able to answer any questions you have about the process and help you to understand the different types of commercial mortgages available.
For more information and advice on semi-commercial mortgages, get in touch with the team at Teito today. We’re experts in finding the right finance solution for your needs, and we can help you to find the best deal on your mortgage.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
Last updated 23 February 2024