A guide to semi-commercial mortgages

What are semi-commercial mortgages?

Semi-commercial mortgages are secured loans for real estate with a mix of residential and business uses.

They are accessible for a wide range of properties and may be used to buy or refinance a house. These loans are often funded by a commercial mortgage lender and are handled similarly to a commercial mortgage.

What properties are classed as semi-commercial?

Many different types of properties fall under the category of “semi-commercial.” Semi-commercial properties are those that include both a commercial component and residential space. This may be something like a flat above a shop, a pub with a house attached, or a B&B.

For semi-commercial properties, some lenders offer lower rates than they do for fully commercial structures. When this is the case, the ratio of residential to commercial space required to get the cheaper rate may change.

Another factor that can prevent your property from qualifying is if there is only one entry to the property, which means that only one renter or company owner might occupy it. In this situation, some lenders will only lend using their full commercial rates.

Why are semi-commercial properties such a popular investment?

The improved returns offered by semi-commercial investments are the main attraction for the majority of investors. The rental yield is sometimes nearly twice as high as what would be feasible with a typical residential buy to let.

Additionally, since the property typically has more than one renter, the chance of total rent loss is greatly reduced. Other renters are likely to continue making payments even if one tenant vacates or falls behind on their rent.

The fact that semi-commercial properties are free from the 3 percent stamp duty surcharge is another significant benefit. Compared to residential investment properties, this lowers their transaction costs when buying.

What are the eligibility criteria for a semi-commercial mortgage?

Commercial mortgage lenders assess semi-commercial mortgage applicants based on the following factors…

Affordability

When determining the affordability of a semi-commercial mortgage, the lender will look to determine if the firm or individual’s predicted income is sufficient to service the loan. Earnings before interest, depreciation, and amortisation are used by business lenders to calculate this, but there is no hard and fast rule on how much you may borrow based on this.

The lender must be convinced that the company’s operational performance is sufficient to support the monthly payments. Some lenders will enable the borrower to report other lawful income if the investment or business is not anticipated to perform well enough.

Other lenders, such as high street and challenger banks, may use their own semi-commercial mortgage calculator to determine how much you can afford to borrow, so it’s critical to seek advice from a whole-of-market broker to ensure you’re matched with the best mortgage provider for your needs and circumstances.

Credit rating

As semi-commercial lending is typically customised and tailored to the person, each lender has a different perspective on individuals/businesses with poor credit. Some prefer to work with consumers who have a clean credit history, while others may give flexible terms to individuals who have various types of negative information against their name.

The important thing to remember is that the market is vast, and with the help of a whole-of-market broker, you may be able to find a lender who specialises in clients with your specific type of credit issue, whether it’s something minor like a missed invoice payment or a severe credit problem like bankruptcy.

Bad credit specialist Commercial lenders are typically willing to consider the age and severity of the credit issue and provide you a deal based on these variables.

Trading history

Some lenders will only provide you with a semi-commercial mortgage if you have a solid track record in the same industry as the company endeavour in question. This is especially true in a high-risk industry like retail, where the period of time you must have been trading for might vary widely.

However, there are lenders that will work with first-time investors and start-up enterprises if they offer predictions and a solid business plan.

The strength of the investment

Most commercial lenders will only give a mortgage if they believe the investment is viable, and they will base their decision on a number of factors discussed above.

They may want a business plan as well as documentation of you or your company’s track record in the relevant industry in order to analyse your previous success and future expectations.

Some lenders would want 190% anticipated rental coverage for a business property or 130% for a buy-to-let for commercial investment mortgages, but it may be able to locate a provider that will take anything between 110% and 125% rental coverage.


Why choose Veracity as your semi-commercial mortgage advisers?

Here at Veracity, we can secure finance for most scenarios, including semi-commercial & commercial mortgagesregulated and unregulated bridging loanshigh-value residential mortgages and Buy to let mortgages and Development Finance. We have an unrestricted network of over 500 high-street, specialist and private lenders who can offer our clients the best deals on the market.

We will negotiate terms and rates for your finance needs, in some cases, lenders will offer us bespoke deals for our clients depending on the type of deal and the individual’s circumstances. Our advisers will work with you to find the most appropriate deals and explain to you any potential risks involved as well as the benefits.

Your adviser will work on your behalf to submit any necessary paperwork needed to apply for the chosen deal and ensure any of your questions are answered in a timely manner.

We charge 0.5% of the loan amount for finance over £500,000 and for complex loans under £500,000. Loans under £500,000 we charge £799.

To see our full corporate fee structure click here. Contact Us to speak to an adviser about Semi-Commercial Mortgages

ABOUT THE AUTHOR

Picture of Woody Snapper

Woody Snapper

Woody works with individuals and business' looking for corporate finance, high net worth mortgages, complex loans, bridging loans and development finance.

To contact Woody.

Tel: 07922 413586

or

Email: woody@veracityfp.co.uk