What is a Semi Commercial Property?

A semi commercial mortgage property simply means a building that has more than one element to it and hence the name, the building tends to have a commercial element; such as a shop or retail unit downstairs with a residential aspect upstairs.

How does a Semi Commercial Mortgage Work?

The dual aspect side of a semi commercial property can leave people wondering how a mortgage on a property of this type works.

A semi commercial mortgage typically works in the same way as a traditional mortgage and despite the dual aspect, you only need to have one mortgage on a semi commercial property.

The main difference between a semi commercial mortgage and other mortgage types is how rental income is assessed; as there’s two different forms of rental income to consider (the commercial side and then the residential side).

Some lenders will also have a different level of appetite on the type of commercial property they lend on; whether they prefer retail or leisure etc. As a broker, we would then work with you to find a suitable lender depending on the commercial side of the property you are looking into.

Whether you are looking to act as a landlord for the commercial element of the property, or whether you want to trade from it yourself will also be welcomed with varying appetite levels between different lenders.

It would also need to be established which part of the property will be rented out as the rental income of the commercial side of the property could cover the mortgage payments comfortably, so you wouldn’t necessarily need to rent the residential side of the property out in the eyes of the lender.

Are Semi Commercial Properties a Good Investment?

Semi commercial properties can be a great investment for both a buyer and a lender; as you have two different elements of income.

Rental property and commercial property appetite does tend to spike up and down; naturally. Having the option to offer both means you can still receive an rental income from the residential side when the commercial market isn’t as efficient – and vice versa.

This is great for a buyer, but also in the eyes of a lender as with two potential income channels, there’s immediately less risk involved.

Semi Commercial Mortgage Deposits

Before the coronavirus outbreak, you would usually be required to have a minimum deposit of around 25% depending on the commercial sector you were buying into.

Due to the increased risk of COVID-19, lenders are now asking for a higher deposit requirement of around 30-40%. This doesn’t mean a lender won’t offer you a lower deposit value, but they are likely to need more in depth proof of your affordability.

Is a Semi Commercial Mortgage More Expensive than a Residential or Commercial Mortgage?

In comparison to a commercial mortgage, a semi commercial type will weigh up similarly when it comes to cost – naturally, there will be differences in the terms as they are different mortgage products.

When looking at a semi commercial compared to a residential mortgage, they do come up as a more expensive option. Buy to let mortgage rates can start at around 2% if it’s taken out in a personal name, whereas semi commercial rates sit around 4% and above – depending on the commercial sector you are buying into.

However, the two forms of rental income you gain from a semi commercial property is likely to give you a better yield compared to a typical buy to let property.

Living Above the Commercial Element of your Property

If you decide to live above the commercial element of your property, this can make it a difficult mortgage to secure.

Most commercial mortgages are classed as non regulated, however as soon as you move into the property the mortgage becomes regulated and there aren’t many lenders that offer regulated commercial products or services – there are still options to consider, they are just very limited.

Get in Touch

If you are interested in a semi commercial mortgage or you want to know more information, get in touch with one of our experts via our enquiry form on our website or via email and we will be happy to help.

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