Apply for a semi-commercial mortgage

With so many unique properties on the market, investing in a semi-commercial property can be a lucrative venture. Semi-commercial properties offer a range of advantages, from diversifying your income to helping you cut back on your operational and living expenses. 

Semi-commercial mortgages offer a specialised lending solution designed for business owners hoping to purchase a mixed-use property. By comparing different lenders, you can find a suitable semi-commercial mortgage or another property financing product for your investment. 

What is a semi-commercial mortgage?

A semi-commercial mortgage (also called a partially commercial or mixed-use mortgage) is a type of mortgage designed for properties that offer both commercial and non-commercial use. 

Unlike a residential mortgage or a limited company mortgage, lenders must consider the overlapping benefits and risks of operating a space that is both residential and commercial. As a result, the mortgage application process can require criteria that assess both the company and the business owner as an individual. 

Semi-commercial mortgages often have terms similar to business mortgages, with repayment periods ranging from 15 to 25 years on average. The loan amount granted via a semi-commercial mortgage can vary depending on factors like:

• Both your business and your personal credit history

• The potential income from the property

• Your business’s financial stability

The property types eligible for a semi-commercial mortgage

The most common example of a semi-commercial property would be a retail shop or restaurant with an apartment on top. In this setup, the entire first floor belongs to the business, while the second floor is for residential use only. 

However, semi-commercial properties can also include:

• Commercial buildings with adjacent undeveloped land 

• Apartment buildings with ground or upper-floor office spaces

• Hotels, inns, or other mixed-use accommodations

• Residential properties with separate floors or apartments used for short-term rentals (i.e. Airbnb)

Ultimately, what qualifies as a semi-commercial property depends on the specifications of each lender. Finding a lender that offers the semi-commercial mortgage solutions your business needs is key. 

Understanding the benefits and risks of a semi-commercial mortgage

For property investors, a semi-commercial property offers multiple opportunities to generate revenue as a mixed-use space. The advantages of investing in a semi-commercial property include:

• Rental income: In addition to the revenue from the commercial component of the building, the residential component can also generate extra income if you choose to rent it out to tenants. This can achieve greater financial stability by ensuring a long-term source of income. 

• Tax benefits: Depending on your local regulations and tax laws, a semi-commercial property may be eligible for tax deductions or allowances related to both residential and commercial components, such as mortgage interest deductions, capital allowances, or business expenses.

• Reduced living expenses: If you plan on living in the residential space attached to your business, a semi-commercial property can offer you reduced living expenses by combining your residential and business mortgage payments into one. 

The risks of a semi-commercial mortgage and property stem from the challenge of operating a building as both an efficient business and a safe residential space. These risks include:

• Residential property risks: Renting out a residential space to tenants comes with all sorts of liability risks to be aware of including residential tenant turnover, rental arrears, or property damage, any of which could affect your cash flow and the revenue you receive from residential units. 

• Commercial workplace hazards: Heavy-duty equipment, like ovens and professional-grade sinks, contribute to the total liability risk of a semi-commercial property. Lenders will likely consider the safety and condition of a property prior to approving a semi-commercial mortgage.

• Additional fees: After purchasing your semi-commercial property, you must consider the resulting expense from broker fees and arrangement fees. The amount of these fees is dependent on the mortgage broker you choose and their specific terms of agreement.

:It is also essential to consider any secondary expenses you may accrue by purchasing a semi-commercial property, for example, renovations or repairs. Ensuring your property meets all safety standards for mixed-use spaces is crucial for avoiding liability risks and adhering to all local and national regulations. Please note that asset finance typically requires an upfront deposit and there is less flexibility with early repayments. 

Your financing options for a semi-commercial mortgage

Each lender has their own requirements and criteria for semi-commercial mortgages, making it important to compare different lenders to find the terms or conditions most suited to your personal and business circumstances.

Here’s an overview of the types of the lending solutions for semi-commercial mortgages: 

• Commercial mortgage lenders: Traditional commercial lenders specialise in financing properties used for business purposes. These lenders assess the income potential of the commercial portion of the property, such as retail or office space, and may offer competitive rates for semi-commercial mortgages. Commercial mortgage lenders typically consider the property’s potential rental income, revenue, and potential for appreciation when determining eligibility.

• Residential mortgage lenders: Some residential mortgage lenders may offer financing for semi-commercial properties, especially if the residential component makes up the larger portion of the property. These lenders evaluate the property’s residential features (i.e. the number of units, occupancy rates, and potential rental income). Residential lenders may charge higher interest rates or have stricter requirements for the commercial component.

• Mixed-use lenders & alternative financing: In some cases, a lender may offer specialised services for purchasing semi-commercial properties. These lenders understand the unique nature of semi-commercial properties and may offer flexible terms, tailored solutions, and faster approval processes compared to traditional lenders. Additionally, alternative financing options like bridging loans and working capital finance can help your business maintain financial stability while expanding with a semi-commercial property purchase. 

How to apply for a semi-commercial mortgage in the UK

If you are seeking to purchase semi-commercial property in the UK, Funding Options by Tide can help. 

We provide UK SMEs with access to both traditional mortgage brokers and alternative financing solutions. Through Funding Options by Tide, you can match with 120+ lenders for loans from £1000 to £20M, including a wide range of property lending products. 

Get started with Funding Options by Tide today. 

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.