Product types
Semi-commercial mortgage
Commercial mortgage on a property with both commercial and residential elements. Common on UK shop-with-flat-above and pub-with-accommodation cases.
Semi-commercial mortgage is a UK commercial mortgage on a property where part of the floor area is commercial (retail, restaurant, office) and part is residential (a flat above the shop, accommodation above a pub, residential at the rear of a workshop). On the UK market the common phrasing is “semi-commercial” or “mixed-use”.
How lenders classify
UK commercial mortgage lenders typically split semi-commercial into:
- Commercial-led semi-commercial: more than 40 to 50% of floor area or rental value is commercial. Underwritten broadly as commercial investment.
- Residential-led semi-commercial: less than 40 to 50% commercial. Some lenders move this into BTL specialist territory, some keep it on the commercial book.
The split matters because pricing, LTV ceilings and ICR thresholds all shift by classification.
Typical UK pricing and LTV
- Commercial-led semi-commercial: 6.5 to 8.5% per annum, LTV ceiling 70 to 75%, ICR 145 to 165%.
- Residential-led semi-commercial: 6.0 to 7.5% per annum, LTV ceiling 70 to 75%, ICR 130 to 145%.
A worked broker example
A London Borough of Hackney purchase. Mixed-use property: ground-floor cafe let at 18,000 per annum, first-floor flat let at 22,000 per annum. Total rent 40,000. Commercial share is 45% by rent, classifying as commercial-led semi-commercial. Purchase price 600,000. Borrower wants 450,000 (75% LTV).
- LTV test: 75% clears a 75% ceiling.
- ICR test at 8.0% stressed: stressed interest on 450,000 is 36,000 per annum. ICR is 111%. Fails a 145% threshold.
Backsolved to 145% ICR, the loan is 310,344. The borrower accepts a substantially smaller loan or finds a lender with a 130% ICR (which sizes at 346,000). Again, LTV is rarely the binding test on semi-commercial.
Tenancy mix on semi-commercial
The residential element on a semi-commercial property must usually be on an AST (assured shorthold tenancy) for the commercial mortgage lender to accept it. A regulated residential tenancy or a vacant residential unit changes the underwriting. Vacant residential is a positive: vacant possession gives flexibility on future letting strategy, although it currently produces no rent.