Semi-commercial
Semi-commercial mortgages
Written by Chris Canham, commercial finance broker with nearly 30 years in financial services. Last reviewed .
Mixed-use property — a shop with flats above, an office with a residential upper part — funded as one asset on one charge.
What it is
One title, two income streams, one lender.
Semi-commercial – or mixed-use – property combines commercial and residential space in one building, usually under one title: a shop with a flat above, an office with residential upper floors. Lenders look first at the split of floor area between the two. Where the residential element is a meaningful share of the building, more lenders will consider it and the terms often improve.
Mixed-use purchases are generally charged stamp duty land tax at non-residential rates, which can be noticeably lower than the residential rates – particularly the higher rates for additional properties. HMRC does look closely at mixed-use claims, so take your own tax advice before relying on it. We arrange the finance; we do not give tax advice.
Lenders weight the two income streams differently. Residential rent is usually seen as the more resilient income, while the commercial rent depends on the tenant, the lease length and the location. If the commercial unit is vacant, some lenders will underwrite on the residential income alone, usually at lower leverage.
Use cases
Typical mixed-use deals.
Shop with flats above
The classic high-street parade unit with one or two residential flats over, let separately.
Office with residential upper parts
Professional ground-floor use – an accountant, a surgery, an agency – with self-contained accommodation above.
Pub or restaurant with living accommodation
Trading premises with an owner's or manager's flat. Lenders will usually look at the trading accounts as well as the property.
Vacant commercial element
How lenders underwrite when the ground floor is empty and the flats carry the income, and what they need to see about re-letting prospects.
Part owner-occupied
Running your own business from the commercial unit and letting the flats, underwritten on a mix of trading profit and rental income.
Splitting the title
Where separating the residential from the commercial creates value. The lender will want the new titles, leases and planning position confirmed first.
Key criteria
How lenders assess mixed use.
| Measure | Typical position |
|---|---|
| Maximum LTV | Lender-dependent, set by the split and the income |
| Commercial floor area | Lenders set a maximum commercial share – check it before you apply |
| Debt service cover | Rent must cover the stressed payment with a margin |
| Term length | Medium to long term |
| Rate type | Fixed or variable, lender-dependent |
| Vacant commercial unit | Considered by some lenders on residential income alone |
The floor-area split is the first thing a lender checks. Measure it before you apply.
Go deeper
Part of the commercial mortgage market.
Semi-commercial lending is part of the wider commercial mortgage market, and most of the same rules apply: income cover, lease quality and the strength of the borrower. Read our commercial mortgage guide for the full picture, and use the affordability calculator to see what the rent roll will support.
Questions
The things people ask first.
Buying a mixed-use building?
Send the floor-area split, the tenancy position and the price, and you will get an indicative view of the lenders likely to fund it.
We aim to respond the same working day.
Or book a 30-minute call at a time that suits you.