Apply 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. 

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. 

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 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.