13 June 2016

Mixed Use Property Mortgages

mortgage semi commercial propertyMixed Use Property Mortgages & Semi Commercial Property Mortgages

Mixed Use or Semi-Commercial property is a unit which has some element of both commercial and residential use. Typically these are shops with flats above, pubs with accommodation or live-work studios. The most common form is the commercial ground floor with residential units above.

There is a trend toward this property type, prompted by a combination of;

  • Split of rental income between different tenants and tenant types
  • The option of short term ASTs on residential units and longer term leases on the commercial element
  • Changes in stamp duty in the April 2016 budget meaning the stamp duty for properties with some form of ‘commercial use’ is less than the equivalent straight residential property

How To Mortgage Semi-Commercial

As with HMOs, semi-commercial differs from normal residential investment property. The split of income, income yield, the longer term nature of some leases and that the residential element is often considered ‘undesired’ means that your regular mortgage lenders are likely to struggle.

The ‘undesired’ comment comes from flats above restaurants, pubs, late licence premises etc. Many mortgage lenders will either not lend for this property type or will reduce loan to value ratios, both of which cause issues for professional landlords and property investors looking to maximise use of cash.

The other common objection we hear is with lenders only wanting to advance a mortgage with a term up to the length of the shortest lease, therefore if the commercial element has five years to run on it’s lease then your maximum term is five years. This can often mean borrowers miss out of securing a lower interest rate for longer or mean they have to port the mortgage elsewhere in a short period of time.

All of the objections above can be overcome by structuring the mortgage correctly and using lenders that understand mixed use property.

Mixed Use Mortgage Options

Regardless of what we hear some mortgage brokers say, there are plenty of options for landlords to finance semi-commercial property. As a guide the following is achievable;

  • Up to 75% loan to value
  • Higher loan to values if other property in the portfolio can be given as additional security
  • Rates typically from 3%
  • Same day answer with approval subject to valuation
  • Adverse borrower credit history does not have to be an issue
  • Experience in the sector is not mandatory

We also find that this type of property can come up at auction, this can be financed at that stage either through specialist auction finance where 7 day completion is required or straight onto mortgage from auction.

If you are looking at semi-commercial or mixed use property then please get in touch, we can provide your options to you almost straight away. Please use the form below and we will try to speak within 24 hours, or if urgent then please call on 01293 541333, always happy to talk.