Using a commercial mortgage to purchase semi-commercial property

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A semi-commercial property is one used for both commercial and residential use. An example is a shop with a residential flat above it or a pub with accommodation for the landlord and their family.

Semi-commercial investments are attractive to property investors who want to diversify their property portfolio.

Semi-commercial mortgages

If the residential part of the property has an entrance reached via the commercial element of the property, a straightforward commercial mortgage can be used for the purchase of the whole property. This is usually the case if the flat is accessed via the shop, or the entrance to a flat in a pub is from a staircase inside the pub.

The advantage of this arrangement is that, unlike buy-to-let property, the extra stamp duty of 3% is not charged for the residential section of the property, nor will be the new tax relief rules that cut tax benefits on buy-to-let mortgage interest payments. Despite the residential element, for mortgage purposes, the whole property is treated as commercial property.

Split mortgages

If the residential section has a separate entrance, then it could be that the residential element has separate title deeds. If this is the case, then two mortgages could be applied to the property, one for the residential area and the other for the commercial area.

For the residential section, a residential mortgage can be used if the owner of the property uses it as their main residence. If the purchaser wants to rent out the residential section, they will need a buy-to-let commercial mortgage and will be subject to all the rules about stamp duty and tax that apply to buy-to-let landlords.

Obviously, the purchaser or their solicitor needs to check the status of the legal titles for the property before they purchase.

Points to consider when applying for a commercial mortgage

If you are wanting to buy semi-commercial property, then there are several options to bear in mind. First, you need to fix the mortgage period, which can be anything from 3 to 30 years. Of course, the shorter the mortgage period, the less interest you will pay, but you will need to be able to afford the higher monthly payments.

The property being purchased will act as security for the loan. The loan amount will be a percentage of the value of the property. This is known as the Loan to Value (LTV), which could be 75% or less of the property value, with the borrower needing to provide the rest of the purchase price. If you want a higher LTV rate and own more property, then the additional property can be used as security to gain a higher rate.

Interest only rates and fixed income rates for two years or more can be arranged.

To help you choose your mortgage options, talk to an advisor at Ascot Mortgages. We can assess your finance requirements then arrange a commercial mortgage with a lender that is familiar with semi-commercial investments.

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*Privacy Notice - Any information provided will be treated with confidentiality and will only be accessible within Ascot Mortgages