When looking for a new property to purchase, there are many things to consider. One of the most important is finding the right mortgage. Many different types of mortgages are available, each with its advantages and disadvantages. Here, we will look at semi-commercial mortgages – what they are, how they work, and how they can benefit you when buying property.
What is a Semi-Commercial Mortgage?
A semi-commercial mortgage is a type of mortgage used to purchase a property that has both residential and commercial use. This type of mortgage is typically used to buy mixed-use properties, which are zoned for residential and commercial use. Semi-commercial mortgages usually have higher interest rates than residential mortgages. This type of mortgage is typically used by investors & business owners looking to purchase a property with both commercial and residential units.
Do I need a Semi-Commercial Mortgage?
Not all lenders will lend on assets which have both a commercial and residential element, so this is where an experienced broker can help source a suitable mortgage.
What are the criteria for a Semi-Commercial Mortgage?
The main criteria for this type of mortgage is that you will require at least a 25% deposit (or equity if you already own the asset) plus you will need to ensure there is good affordability to service any borrowing that is taken out.
What rates are offered for Semi-Commercial Mortgages?
Semi-commercial mortgages are available from some high street lenders and also from more specialist lenders available through brokers. The rates offered will depend upon the deposit, the asset itself, the credit profile of the borrower and the overall affordability. The loan to value (LTV) ratio for a semi-commercial mortgage is a maximum of 75% and these mortgages, depending upon the lender, are available on an interest only or repayment basis. Terms of 25 years are also possible.
What are the advantages of securing a Semi-Commercial Mortgage?
The main advantage of this type of mortgage is that it usually comes with a lower interest rate than a full commercial mortgage. This can save you money on your monthly repayments. Another advantage is that it can be easier to qualify for a semi-commercial mortgage than a conventional personal mortgage as the affordability is based upon the income the asset will generate (i.e. rents) rather than being based upon your personal income, although you will need to be able to evidence that you can support yourself financially.
What about the disadvantages of pursuing this kind of mortgage?
There are some disadvantages to pursuing a mortgage on a semi-commercial property. The interest rate may be higher than for a residential mortgage, and some lenders (not all) may require that you have experience as a landlord before they will approve the loan. Semi-commercial properties can also be more expensive to maintain than residential properties as you may have several tenants.
Is a Semi-Commercial Mortgage right for me?
A semi-commercial mortgage is a type of mortgage for both residential and commercial purposes. You can get a different mortgage for each piece if there are long term leaseholds in place for each element of the asset. Lenders usually offer different rates and terms for semi-commercial mortgages, so it is essential to shop around and compare before you decide which one is right for you.
Are Semi-Commercial Mortgages more expensive than residential?
Yes, semi-commercial mortgages are more expensive than residential ones. The reason is that lenders consider them a higher risk, so the interest rates are higher to offset this risk. Additionally, semi-commercial properties tend to be larger and more complex than residential properties, so they have more costs.
Are Semi-Commercial Mortgage rates available through a high street bank?
Yes, semi-commercial mortgage rates are available through some high street banks. However, it is always worth speaking with a broker who would be able to let you know of other lending options from the market.
Do I need previous experience to apply for a Semi-Commercial Mortgage?
No, you do not need previous experience to apply for a semi-commercial mortgage. Some lenders may insist you need to be a homeowner, but not all. A broker can help you find the right mortgage for your needs and guide you through the application process.
Does my credit score matter in a Semi-Commercial Mortgage assessment?
Yes. Lenders will look at your credit score & profile to determine your ability to repay the loan. A higher credit score will give you a better chance of qualifying for a loan and getting a lower interest rate, however some lenders will accept previous bad credit registered.
Can you get a Commercial Mortgage with bad credit?
If you have bad credit registered, such as defaults & county court judgements you will struggle to get borrowing from high street lenders, however there are specialist lenders available through mortgage brokers who can help clients obtain a bad credit commercial mortgage.
How long does it take to arrange a Semi-Commercial Mortgage?
Depending on the lender and the deals complexity, it can take anywhere from a few weeks to a few months to arrange a semi-commercial mortgage.
What documents are required when making an application to get a Semi-Commercial Mortgage?
You will need to provide various documents and forms to the lender. This will typically include company accounts, bank statements, personal tax returns, proof of identity and other documentation detailing your income, assets & liabilities. The lender will also need information on the property and what solicitor you will be using for the legal work.
What are the costs associated with a Semi Commercial Mortgage?
The costs involved will vary from lender to lender, however here is a guide to what fees you may be charged:
Valuation Fee – This is payable upfront and is typically more expensive when compared to a standard residential mortgage valuation.
Lender Arrangement Fee – This can range from a flat fee to a percentage of the amount being borrowed.
Legal Fees – This depends upon who you use. Please be aware that some lenders only allow conveyancers who are on their ‘panel’. Stamp duty may also be payable if you are purchasing a property – so best to seek advice in this area.
Broker Fee – This maybe charged – it all depends upon the transaction.
When you are provided with a quotation that should clearly detail what fees are payable and when due.
How to explore your Semi-Commercial Mortgage options with the Money Hub
If you are looking into taking out a mortgage, but you don’t have the time, energy or experience to find the right deal, help is at hand.
Call The Money Hub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated commercial mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.
There are several high street lenders that provide commercial mortgages and then there are specialist lenders who offer their products through commercial brokers. By speaking with a broker they will be able to let you know of the options available from many lenders.