What Is a Semi-Commercial Mortgage?
A semi-commercial mortgage finances properties that combine residential and commercial elements - typically a mixed-use building where part is used or let for commercial purposes and part provides residential accommodation.
The most common examples are: a retail shop or office on the ground floor with residential flats above; a public house with a manager's flat; a guest house or B&B with owner's accommodation; and professional premises (dental surgery, solicitor's office) with attached residential.
Why Semi-Commercial Needs a Specialist Lender
Standard residential mortgage lenders assess purely residential properties. Standard commercial mortgage lenders assess purely commercial properties. Semi-commercial properties - with elements of both - fall between these categories and require lenders specifically set up to handle the mixed-use valuation and income assessment that these properties demand.
The valuation is more complex than either pure residential or pure commercial: the valuer must assess the commercial element on a yield basis (annual rent divided by yield percentage) and the residential element on a comparable basis (price per square foot or bedroom relative to local comparables), then combine these into a single overall property value. This dual-method valuation requires a specialist commercial and residential RICS surveyor.
Income Assessment for Semi-Commercial Properties
Where the property is an investment (the borrower is not occupying either element), income assessment uses the aggregate of: the commercial rental income (ground floor shop, office, or other commercial use); and the residential rental income (the flats or residential accommodation above). Both are stress-tested, with the commercial element typically assessed at a yield basis and the residential element at the standard BTL ICR methodology.
Where the borrower occupies part of the property (for example, a shopkeeper living in the flat above their shop), the assessment is more complex - blending the owner-occupier affordability assessment for the residential element with the investment income assessment for the commercial element.
LTV for Semi-Commercial Properties
Maximum loan-to-value on a semi-commercial mortgage depends heavily on the balance between the residential and commercial floorspace. The more residential the property, the closer it is assessed to residential lending and the higher the available LTV.
| Property Composition | Typical Maximum LTV | Notes |
|---|---|---|
| Predominantly residential (75%+ residential floorspace) | Up to 70% LTV | Assessed closer to residential; some residential lenders accept |
| Balanced residential and commercial (40-75% residential) | Up to 65% LTV | Standard semi-commercial specialist lenders |
| Predominantly commercial (under 40% residential) | Up to 60% LTV | Assessed closer to commercial; specialist lenders |
| Owner-occupied commercial with residential above | Up to 65% LTV | Blended assessment; specialist lenders |
Specialist Semi-Commercial Lenders
Our semi-commercial lender panel includes: Together Money (specialist mixed-use lender with broad appetite for unusual combinations); Aldermore Bank (active in semi-commercial including flats above shops and mixed-use estates); Shawbrook Bank (strong on semi-commercial investment); Secure Trust Bank; and specialist commercial lenders with mixed-use appetite. The panel is smaller than for pure residential or commercial but genuine and active.