Last reviewed: June 2026
TL;DR- Semi-commercial (mixed-use) mortgages finance properties with both residential and commercial elements - the most common example is a shop on the ground floor with flats above.
- The regulatory status of the mortgage depends on which element predominates - if the residential element is primary, the loan may be regulated; if commercial predominates, it is typically unregulated.
- LTV for semi-commercial properties is typically 65-75%, higher deposits than standard residential are required.
- Fewer lenders offer semi-commercial products than standard residential or commercial mortgages - a specialist broker is important.
What Is a Semi-Commercial Property?
A semi-commercial or mixed-use property is one that has both residential and commercial elements within the same building or on the same title. The most common examples are: ground floor retail or commercial unit with one or more residential flats above; a public house with residential accommodation; a guest house or bed and breakfast with owner's accommodation; and a professional office forming part of a residential building.
The mix of uses means that neither a standard residential mortgage nor a standard commercial mortgage is appropriate on its own. Semi-commercial mortgage products are specifically designed for these mixed-use buildings.
How Lenders Assess Semi-Commercial Properties
Lenders assess both the residential and commercial elements of the property:
- Commercial element: assessed on the rental yield or trading income from the commercial unit. The strength of the commercial tenant's covenant (their financial reliability) and the lease terms are important factors.
- Residential element: assessed on the residential rental value or owner-occupation status.
- Combined income: the total income from both elements is used in the coverage calculation.
The overall property valuation uses a combination of methods for the different elements. A RICS valuer experienced in mixed-use properties is required.
Regulatory Status
The FCA regulation of the mortgage depends on the predominant use of the property. If the residential element represents more than 40% of the total floor area of the property, the loan may be treated as a regulated mortgage credit agreement under the Mortgage Credit Directive. If the commercial element predominates, the loan is typically unregulated commercial lending. The regulatory boundary affects the conduct protections available to the borrower - borrowers should confirm the regulatory status of their specific transaction with their lender and broker.
Lender Availability and Rates
Semi-commercial mortgages are offered by a smaller pool of lenders than standard residential or commercial mortgages. Specialist lenders, challenger banks and some building societies operate in this space. Rates are typically higher than standard residential mortgage rates and comparable to or slightly above standard commercial rates. LTV is commonly capped at 65-75%, requiring a deposit of 25-35%.
Frequently Asked Questions
Can I get a residential mortgage on a property with a small commercial element?
Some lenders will consider a residential mortgage where the commercial element is very small, accessory to the residential use and does not affect the residential character of the property. For example, a single room used as a small home office or studio let to a single user. Where the commercial element is more significant - a business unit on a separate lease - a semi-commercial product is typically required. Lender appetite for mixed-use properties on residential products varies and should be checked in advance.
Does a change of use from commercial to residential affect the mortgage?
Converting a commercial property to residential use requires planning permission and, in many cases, prior approval under permitted development rights. Once converted to full residential use and with the commercial use removed from the planning permission, a standard residential mortgage may be available on the converted property. The conversion process and its impact on the mortgage should be planned carefully with advice from a planning consultant and specialist mortgage broker.
Can I live in the residential part of a semi-commercial property with a semi-commercial mortgage?
Yes. Many semi-commercial mortgages allow the borrower to occupy the residential element. Where the borrower occupies the residential part, the mortgage may be regulated (depending on the floor area split). The commercial element is let to a tenant. This is a common structure for owner-operators of small businesses who want to live above their business premises.
What happens if the commercial tenant vacates in a semi-commercial property?
If the commercial tenant vacates and the commercial unit becomes empty, the rental income from that element stops. The borrower must continue to service the full mortgage from other sources during the void period. Commercial void periods can be longer than residential voids, particularly in quieter retail or industrial markets. Borrowers should consider how they would manage a commercial void period before committing to a semi-commercial purchase.
