Semi-Commercial Guide | This Semi-Commercial Guide explains how to finance a property that has both commercial and residential use. A semi-commercial mortgage is designed for mixed-use property, such as a shop with flats above or an office with a flat beside it. These properties need specialist finance because lenders assess two income types and two risk levels.
You can use this guide to compare rates, understand criteria, and prepare a strong application. If you plan a conversion or refurbishment, review our Development Finance Guide for more details. If your property is mainly residential, see our Buy-to-Let Guide for alternative funding routes.
What Is a Semi-Commercial Property?
A semi-commercial property has both commercial and residential parts.
Examples include:
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A shop with flats above.
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An office with a connected apartment.
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A pub with owner accommodation.
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A B&B with a private residential area.
Lenders classify a property as semi-commercial when the commercial area is not large enough to class the whole property as fully commercial. The split between residential and commercial use affects lenders’ appetite, risk levels, and valuations.
Why Choose a Semi-Commercial Mortgage?
A semi-commercial mortgage can offer competitive rates because lenders see the residential part as lower risk. Many lenders offer longer terms and interest-only options, giving better cash flow for investors.
These mortgages suit:
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Landlords with mixed rental income.
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Business owners buying premises with living space.
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Investors improving yields through residential add-ons.
Semi-commercial finance can also be more flexible than a standard buy-to-let if the commercial tenant holds a long, secure lease.
Eligibility and Lending Criteria
Lenders assess risk in both property parts.
Typical criteria include:
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Loan to Value (LTV): Up to 75% for strong mixed-use properties.
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Deposit: Usually 25% to 35%.
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Interest rates: Often start around 3% to 5%, depending on risk.
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Commercial tenant strength: A long lease improves your case.
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Residential income: Rental demand and achievable rent matter.
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Borrower profile: Lenders review experience, income, credit, and assets.
Owner-occupiers can access competitive terms if trading accounts support the debt. Investors must demonstrate stable rental demand in both parts.
For complex conversions, review our Development Finance Guide for further support.
How Much Can You Borrow?
Your loan amount depends on the valuation and the expected rental income.
Lender’s review:
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Commercial rental income.
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Residential rental income.
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Tenant profile and lease length.
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Comparable market values.
Many semi-commercial mortgages offer up to 75% LTV. Higher LTVs may be possible for very strong properties with secure commercial leases.
Rates, Fees, and Costs
Semi-commercial rates are usually higher than residential rates but can beat full commercial pricing. Rates depend on tenant strength, property type, and experience.
Common costs include:
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Arrangement fees of 1% to 2%.
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Valuation fees based on property size.
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Legal fees for commercial and residential checks.
Some lenders offer interest-only terms, which can boost cash flow.
You may also need building insurance. Our General Insurance services can provide tailored protection.
The Application Process: Step by Step
| Step | Title | Description |
|---|---|---|
| 1 | Prepare Documents | Gather accounts, tax returns, leases, ID, and proof of deposit. |
| 2 | Property Valuation | A valuer checks both property parts and confirms rental estimates. |
| 3 | Lender Assessment | The lender reviews income, lease terms, borrower experience, and property condition. |
| 4 | Legal Work | Solicitors confirm titles, access rights, lease structure, and compliance. |
| 5 | Mortgage Offer | You receive a binding offer with rate, term, and conditions. |
| 6 | Completion | Funds transfer to buy, refinance, or improve the property. |
| Additional Note | Projects With Works | If your project includes works, consider bridging or development options in our Development Finance Guide. |
Common Pitfalls and How to Avoid Them
Poor Lease Structure
Weak commercial leases harm valuations. Use secure and well-drafted leases.
Underestimating Costs
Commercial legal fees and valuations can be higher. Budget clearly.
Weak Tenant Covenant
A risky tenant can reduce LTV. Review tenant reliability first.
Ignoring Insurance Costs
Mixed-use buildings need proper cover. Our General Insurance services can help.
Get Specialist Support
Semi-commercial finance needs expert guidance. Contact our team for tailored advice and support with your mixed-use mortgage. You can also explore our services in the Buy-to-Let Guide, General Insurance, and Development Finance Guide to plan your next steps.
Thank you for reading our “Semi-Commercial Guide UK | Mixed-Use Property Finance” publication. Stay “Connect“-ed for more updates soon!
Frequently Asked Questions – Semi-Commercial Mortgages
| Question | Answer |
|---|---|
| What types of properties qualify? | Any mixed-use property with commercial and residential parts may qualify for semi-commercial finance. |
| Can I live in the residential area? | Yes. Many borrowers live in the residential section. Your use can affect lender choice. |
| Can I get interest-only terms? | Yes. Many lenders offer interest-only options to support your cash flow strategy. |
| Do lenders need trading accounts? | Owner-occupiers need trading accounts. Investors rely mainly on rental income assessments. |
| Can I use a semi-commercial mortgage for refurbishment? | Yes. Many lenders support light refurbishment. Use development finance for major works. |
| What deposit do I need? | Most lenders need a deposit of 25% to 35% of the purchase price. |
| What is the maximum LTV? | Many lenders offer up to 75% LTV for strong properties with secure rental demand. |
| How do lenders assess risk? | Lenders assess tenant strength, lease length, borrower experience, and property condition. |
| Are rates higher than residential mortgages? | Rates are higher than residential but often lower than full commercial mortgages. |
| Can I buy as a limited company? | Yes. Many lenders accept SPV companies for semi-commercial mortgage applications. |
| Do lenders accept first-time investors? | Some lenders accept new investors. Strong income and good credit help secure approval. |
| Can I refinance an existing mixed-use building? | Yes. Many lenders offer refinancing to release equity or reduce interest costs. |
| Can the residential income support my application? | Yes. Lenders consider both residential and commercial rental income for affordability. |
| Do I need a commercial lease in place? | A lease helps. Empty commercial units may reduce LTV or increase rates. |
| Can I switch to a buy-to-let mortgage later? | Only if the property becomes fully residential. See our Buy-to-Let Guide for details. |
| Are semi-commercial mortgages regulated? | Most are unregulated unless you live in the property and borrow as a consumer. |
| How long are typical mortgage terms? | Terms normally range from 5 to 30 years, depending on the lender. |
| Do lenders accept multiple units? | Yes. Lenders accept multi-unit setups, including several flats above a commercial unit. |
| Can I borrow without a commercial tenant? | Yes, but expect lower LTV and higher rates until a tenant signs a lease. |
| What documents do I need? | You need ID, proof of deposit, accounts, leases, rental estimates, and property details. |