What Are Commercial and Semi-Commercial Mortgages?
Commercial Mortgages
A commercial mortgage is a loan intended for properties used solely for business purposes. These mortgages are perfect for purchasing or refinancing commercial properties such as:
• Offices
• Warehouses
• Retail units
• Industrial buildings
• Restaurants and pubs
Commercial mortgages are typically aimed at businesses and property investors, allowing them to secure larger loans with more flexible terms.
Semi-Commercial Mortgages
A semi-commercial mortgage is designed for mixed-use properties that combine both residential and commercial spaces. Common examples include:
• Shops with flats above
• Guesthouses with living quarters
• Buildings with office space and residential units
These mortgages are ideal for property owners who operate a business on-site while either living in or renting out the residential portion for additional income.
How Do Commercial and Semi-Commercial Mortgages Function?
• Loan-to-Value (LTV):
Lenders typically offer up to 75% LTV for semi-commercial properties, with slightly lower LTV for fully commercial properties. A higher LTV may be available with additional security or stronger borrower credentials.
• Interest Rates:
Interest rates for commercial mortgages usually range from 3% to 6%, while rates for semi-commercial properties may vary slightly based on the property mix and risk factors.
• Repayment Structures:
Repayment options include interest-only mortgages, where you only pay the interest during the term, or repayment mortgages, which cover both the interest and principal.
• Documentation Required:
• Personal and business bank statements (3–6 months)
• Proof of income and business accounts (usually 2 years)
• A business plan for owner-occupied properties
• Application Timeline:
The process typically takes between 6 and 12 weeks, depending on the lender and the complexity of your application.
Why Opt for a Commercial or Semi-Commercial Mortgage?
These mortgages are ideal for:
Business Growth
Acquire larger premises to accommodate your growing business operations.
Mixed-Use Investments
Diversify your income by combining residential and commercial rental streams.
Commercial Property Development
Finance property acquisitions, renovations, or new construction projects.
Property Acquisitions
Seize opportunities such as auction purchases or property chain breaks.
Expenses Involved in Commercial and Semi-Commercial Mortgages
Costs to Consider with Commercial and Semi-Commercial Mortgages
Before applying, it’s important to understand the associated costs:
• Upfront Fees:
• Arrangement Fees: Typically 1%-2% of the loan amount.
• Valuation Fees: Costs depend on the property’s value and complexity.
• Legal Fees: Cover the services of both the lender’s and your solicitor.
• Ongoing Costs:
• Interest Payments: Rates vary depending on whether the mortgage is fixed or variable.
• Maintenance Costs: Especially relevant for mixed-use properties.
• Exit Fees:
Some lenders may charge fees for early loan repayment or exiting the agreement.
Eligibility Criteria
Lenders will consider various factors when reviewing your mortgage application:
• Credit History:
While excellent credit isn’t a must, a solid credit profile enhances your chances of securing better terms.
• Deposit:
Typically, you’ll need a deposit of 25%-40% of the property’s value.
• Property Type:
Mixed-use or commercial properties may require more thorough scrutiny.
• Income and Financials:
Your business financials and rental income are key in determining eligibility and loan amount.
• Exit Plan:
A clear repayment strategy, such as refinancing or selling the property, is essential.
Advantages of Working with Compare the Mortgage
At Compare the Mortgage, we specialise in simplifying the complexities of commercial and semi-commercial mortgages. Here’s what makes us different:
Wide Lender Network
Gain access to competitive rates from high-street banks, challenger banks, and specialised lenders.
Expert Advice
Our experienced brokers customise solutions to meet your specific goals, whether you’re an investor or a business owner.
Streamlined Applications
We handle the entire process, from finding the best lender to managing the paperwork.
Transparent Costs
Transparent explanations of fees, rates, and repayment terms, giving you the confidence to plan ahead.
Fast Approvals
With our expertise, we can accelerate your application process, helping you meet tight deadlines.
Common Questions About Commercial and Semi-Commercial Mortgages
What’s the difference between a residential and semi-commercial mortgage?
A residential mortgage is for properties used solely for living, while a semi-commercial mortgage finances properties with both residential and commercial elements.
Can limited companies apply for these mortgages?
Yes, both commercial and semi-commercial mortgages are often available to limited companies.
How much deposit is required?
Typically, a deposit of 25%-40% of the property value is needed, depending on the type of mortgage.
Are these mortgages regulated by the Financial Conduct Authority?
Semi-commercial mortgages may be regulated if the residential component is occupied by the borrower, while most commercial mortgages are unregulated.
How do I find the best rates?
Use a commercial mortgage calculator to estimate costs, or work with a broker like The Landlords Broker to access tailored options.
Start Your Financing Journey Today
Whether you’re buying a commercial property, investing in mixed-use real estate, or refinancing your portfolio, Compare the Mortgage is here to assist. Contact us today for expert guidance, competitive rates, and a seamless application process tailored to your specific needs.