Semi-commercial mortgages

Commercial and semi-commercial properties are exempt from the 3% stamp duty surcharge which has been applied to second properties. Because of this exemption investors have taken a keen interest in semi-commercial properties. This type of property offers a balance of risk and reward because of the mix of residential and commercial.

There are various property types that are classified as semi-commercial, here are some examples:
• Retail units with flats above
• Offices with flats above
• Public houses or restaurants with self-contained living accommodation
• B&Bs with owner’s accommodation
• Home based health & beauty clinics

Mortgages for semi-commercial properties will typically come with higher interest rates than residential and are only available from a limited number of lenders. Fees for arrangement of the mortgage will range from 0.75% to 2%, and interest rates will often be Bank of England base rate plus 3%. Loans can be on a capital and interest or interest only basis.

If the residential element is on a buy to let basis, the interest coverage ratio will be applied to that element. The commercial element will be judged on a mix of the business performance as shown through its accounts and/or the lease arrangements depending on whether the applicant is an ‘owner occupier’ – in other words they are the business owner, or whether the applicant is a landlord investor and the business is a tenant only.

If the residential section is on a buy to let basis, the usual interest coverage ratio (ICR) will be applied to that section. The commercial section will be assessed on the combination of the business performance as detailed through its accounts and/or the lease arrangements in place, in addition to whether the applicant is an ‘owner occupier’ – essentially they will fall into 1 of 2 categories, they will either be the business owner, or a landlord investor and the business is a tenant only.

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At Aspire Financial Services we can help clients in both buy-to-let and owner-occupier capacity in addition to investors seeking to maximise their returns. To find out more, call to book your free 30-minute consultation.


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