What is a semi-commercial mortgage?

A mixed-use mortgage, also called a semi-commercial mortgage, is a loan secured on a building that has both residential and commercial parts. Typical examples are a shop with a flat above, an office with apartments over it, a pub with letting rooms, or a parade of shops with flats on the upper floors.

Lenders treat these buildings as their own category, sitting between residential mortgages and full commercial mortgages. They look at both parts, the homes and the business space, because each brings its own income, its own risks and its own demand from future buyers and tenants.

The term covers both buying and refinancing, and both investors and owner-occupiers. A landlord might own a parade of shops with flats above, while a business owner might live above the shop they run.

Lenders assess a semi-commercial property on the value of the whole building, the rent from each part and the strength of the leases. The commercial lease is read for its length, rent, repairing terms and break clauses, and the residential tenancies for their rent and type. The borrower's experience and finances are checked too.

Most lenders test that the rent covers the interest by a set margin, known as rental cover or the interest cover ratio, which each lender sets for itself. Where the borrower runs a business from the commercial part, the lender looks at the business's accounts instead of a lease.

The balance between the two parts matters. A building that is mostly residential, with a small shop, is often easier to finance than one where the commercial space dominates. A specialist lender may be needed where the commercial use is unusual or the building has been altered over time.

Some semi-commercial mortgages are regulated and most are not. Under FCA rules, a loan is a regulated mortgage contract when the borrower or a close family member lives in the property and at least 40% of the land is used as a home (FCA Handbook PERG 4.4, accessed 20 Oct 2026). Most investment purchases fall outside regulation.

A regulated mortgage brings affordability checks under the FCA's mortgage rules and access to the Financial Ombudsman Service. An unregulated loan is business lending, with terms agreed between the borrower and the lender, so reading the offer and its conditions carefully matters more.

Whether a loan is regulated also changes which lenders and brokers can arrange it. A broker arranging a regulated mortgage needs the right FCA permission, which can be checked on the FCA Register.

Semi-commercial mortgages usually need a larger deposit than residential mortgages, because lenders treat the commercial part as higher risk. The amount depends on the lender, the building, the leases and the borrower, and lenders set their own maximum loan-to-value, which tends to fall as the commercial share of the building rises.

How much can be borrowed is usually decided by the lower of the loan-to-value limit and the rental cover test. A building with strong rents on long leases supports more borrowing than one with short leases, vacancies or rents below the market level.

Running the figures for a specific building, from the price and deposit to the rent and the rate, shows how the loan and repayments fit together. The semi-commercial mortgage calculator page explains each input.

In England and Northern Ireland, mixed-use property is charged Stamp Duty Land Tax at the non-residential rates, not the residential ones. A property counts as mixed when it has both residential and non-residential parts, such as a flat connected to a shop or office, which changes the tax due (GOV.UK SDLT non-residential and mixed rates, accessed 20 Oct 2026).

The non-residential rates are zero on the first £150,000, 2% on the next £100,000 and 5% on the amount above £250,000, with no higher rates for additional dwellings (GOV.UK SDLT non-residential and mixed rates, accessed 20 Oct 2026). Scotland and Wales have their own land taxes with separate rates.

Stamp duty is a cost of buying rather than part of the loan, so it needs to come from savings alongside the deposit, legal fees and valuation. A solicitor confirms the tax treatment on each purchase.

Applying for a semi-commercial mortgage starts with the building's details, the leases and tenancies, the rent, and the borrower's finances and experience. Lenders usually give an initial view on these, then instruct a commercial valuation and, if it supports the loan, issue terms and an offer subject to legal work.

Lenders also ask for proof of deposit, details of any existing property and debts, and for a company purchase, the company's accounts and the directors' personal guarantees. Business owners buying their own premises add trading accounts for the business.

Many borrowers use a broker who arranges mixed-use cases, because the choice of lenders is wider than it first appears and criteria differ on commercial share, use and leases. Firms that arrange this kind of finance are listed on the semi-commercial mortgage brokers page.