Mortgages for Semi Commercial and Complex Properties

09 Apr 2020

Mortgages for Semi Commercial and Complex Properties

Mixed-Use Properties: Semi Commercial Mortgages

Mixed-use properties relate to premises with both a residential and commercial element, for example, retail properties with a residential flat above. Whilst both parts of the property can be let, together or separately, is it not possible to secure such an investment through a buy-to-let mortgage product.

This type of investment is popular in property acquisitions, since they offer a blended mixture of revenue streams through rental income, and can provide returns to channel into expanding a property portfolio.

There are benefits to be found in reducing the Stamp Duty payable since dual-use properties attract non-residential rates, and the surcharge of 3% levied on second residential properties does not apply.

Purchase Value

Duty payable on residential property

Duty payable plus 3% surcharge on a second residential property

Duty payable on a non-residential investment

£200,000

£1,500

£7,500

£1,000

£300,000

£5,000

£14,000

£4,500

£500,000

£15,000

£30,000

£15,500

£600,000

£20,000

£38,000

£19,500

 

Although a proportion of the property is residential, this type of investment must be financed with a commercial mortgage rather than through a buy-to-let product.

To identify the most attractive commercial mortgage rate, we recommend using an experienced broker who will be able to identify the best products available for you dependant on your experience of the property investment market.

Revolution Finance Brokers also offer a service to assist brokers who are not experienced within the commercial mortgage market, whereby our expert team will be able to secure the ideal rates and terms for your client, with whom you communicate directly.

Illustration

A freehold investment property at a cost value of £650,000 including:

  • A retail unit with A1 permitted use with five years remaining of a ten-year lease term at £18,000 per annum
  • A maisonette located above the retail unit, with 3-bedrooms and let for £17,000 per annum
  • Total annual yield for the property (annual rent against property value) of 5.4%
 

Anticipated Finance

For an experienced investor with demonstrable income security, indicative rates and terms could be:

  • Interest starting at 2.5% over base rate
  • A loan-to-value ratio of a maximum of 75%
  • Mortgage lending available from £200,000-£487,500
  • Terms offered between two and thirty years
  • Options to choose between capital repayment, interest-only repayment, or a mixture of the two
  • Arrangement fees of between 0.75-2.0% of the loan value
 

Starting your Application

Given the individual nature of commercial investments, each application is considered alongside the applicable circumstances of the investor, and nature of the acquisition. We recommend having all of the supporting information to hand to support an expedited application process, including proof of income to be able to demonstrate affordability.

Initially, Revolution Finance Brokers would seek to achieve an Agreement in Principle (AIP), which is an initial offering to allow you to assess the terms and rates, and compare to other potential products. 

Once you have accepted an AIP, any additional information and supporting documents will need to be submitted. Whilst requirements vary between lenders, these generally will include:

  • Bank statements for yourself and your business of at least six months
  • Records to show your assets and liabilities
  • Confirmation of how you are funding the deposit payment
  • Particulars of your lease and/or rental agreements
 

To ensure a smooth process, an independent valuation by an appointed surveyor can be conducted whilst final documents are submitted, since it can take around two weeks for a site visit and a valuation report to be prepared. This valuation considers:

  • The market value of the property in consideration of the rental income
  • The market value of the property should it be a vacant possession scenario
  • The achievable rent at market value for each element of the property
 

Market value is reliant on the leases and rental agreements in place, so it is crucial to have details of the tenancy agreements to hand before the valuation to support a fair valuation report.

Once a valuation report has been finalised, and all documentation collated, the lender will move on to the underwriting stage of the process at which point our team will liaise between you and the lender to negotiate the best terms, and resolve any pending queries. A formal mortgage offer will then be released for your approval.

To support our clients throughout the process, one of the Revolution Finance Brokers will act as your direct point of contact to oversee the completion process.

More Information

For more support, information and advice, please give the team a call or drop us an email. We would be more than happy to help!

 0330 304 3040

 info@revolutionbrokers.co.uk

Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.

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Author

Almas Uddin

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.