Semi-Commercial Mortgages Explained

A semi-commercial mortgage is a loan on a property that is part business and part home, such as a shop with a flat above. Lenders look at both incomes and both parts of the building, and because the flats are easier to sell, terms are often better than for a purely commercial property.

Shops with flats are one of the most popular property investments in the UK. They are also where we see good deals go wrong because the buyer went to a residential lender, or a pure commercial lender, instead of one that understands both.

This guide covers what lenders check, deposits, regulation, Stamp Duty and common problems. For the bigger picture, see our commercial mortgage guide.

Can you get a mortgage on a shop with a flat above?

Yes. Specialist semi-commercial lenders will usually lend 70% to 75% of the value, looking at the shop rent and the flat rent together. If you or a close family member will live in the flat and it makes up at least 40% of the building, the mortgage is likely to be regulated, and fewer lenders offer that.

What do lenders look at?

Factor	What lenders want to see
Both incomes	The commercial rent or trading, plus the residential rent
The split	A meaningful residential part, measured by floor area or value
Leases and tenancies	Length of the shop lease and the tenancies on the flats
Access	Separate entrances to the flats
Your experience	As a landlord or business owner
Deposit	Often 25% to 35%

Which situations do lenders see most?

These are illustrative situations, not Option Finance client outcomes.

Investor buying a let parade

Shop and flats all let. Lenders add the rents together and check they cover the payments.

The cleanest case to finance

Trading from the shop

You run your own business downstairs. Lenders look at your business accounts too.

Your trading figures count

Living above the shop

You or family will live in the flat. If it is 40% or more of the building, it is likely to be regulated.

Fewer lenders, more checks

Vacant shop

The flats are let but the shop is empty. Lenders reduce the loan or want a tenant first.

Expect a smaller loan

Illustration only

A building with a ground-floor café let at £15,000 a year and two flats let at £9,600 a year each, £34,200 in total, sells for £420,000. A semi-commercial lender offering 70% would lend £294,000, as long as the combined rent covers its payments by the margin it needs.

What rates and terms can you expect?

Loan-to-value: often up to 70% to 75%, higher than many pure commercial lenders, because the flats are easier to sell.
Term: commonly up to 25 years.
Rates: usually between buy-to-let and commercial rates.

Expect to provide the shop lease, the flat tenancy agreements, rent received, details of any other property you own, and accounts if you trade from the premises.

What problems should you look out for?

Flats with no separate access from the shop are harder to finance.
Hot food takeaways below flats are accepted by fewer lenders.
Short commercial leases or an empty shop reduce the loan.
Flats in poor condition may need refurbishment finance first. See our refurbishment finance guide.

When is a semi-commercial mortgage regulated?

If you or a close family member will live in the property, and at least 40% of it is used as a home, the mortgage is likely to be a regulated mortgage. The FCA sets this out in PERG 4.4 of its Handbook. Regulated lenders look at your personal affordability. If you let the flats to tenants, it is usually unregulated.

What Stamp Duty do you pay on mixed-use property?

Mixed-use property in England and Northern Ireland is charged non-residential Stamp Duty rates: 0% up to £150,000, 2% to £250,000 and 5% above. On £420,000 that is about £10,500. That is often lower than residential rates with the additional-home surcharge. GOV.UK lists a flat attached to a shop as an example of mixed use in its non-residential and mixed rates guide. Your solicitor will confirm for your purchase.

Frequently asked questions

What is a semi-commercial mortgage?

A mortgage on property with both business and residential parts, such as a shop with a flat above.

How much deposit do I need?

Often 25% to 35%. It depends on the property, the rents and the lender.

Can I live in the flat above my shop?

Yes. If you or close family live there and it is at least 40% of the property, the mortgage is likely to be regulated.

What Stamp Duty applies to mixed-use property?

Non-residential rates in England and Northern Ireland: 0% up to £150,000, 2% to £250,000 and 5% above.

Can I get a mortgage if the shop is empty?

Some lenders will, but the loan is usually smaller. Others want a tenant in place first.

Can I buy semi-commercial property in a limited company?

Yes. Many investors do, and lenders usually ask directors for personal guarantees.

Do lenders accept takeaways below flats?

Some do, but fewer than for other shop uses. Expect a narrower choice of lenders.

Speak to Option Finance about your property

Tell us about the building, the rents and whether anyone will live there. We will tell you straight which lenders fit and what to check before you offer.

Book a free initial consultation using the enquiry form below. See also our commercial mortgage advice and commercial buy-to-let guide.

Some buy-to-let and commercial mortgages are not regulated by the Financial Conduct Authority. Regulation depends on the mortgage type and circumstances.

Important information

Semi-commercial mortgages are usually unregulated, unless you or a close family member will live in at least 40% of the property.

Figures are illustrations, not quotes. Lender criteria change often.

Your home may be repossessed if you do not keep up repayments on your mortgage. This guide is general information, not a personal mortgage recommendation.

Semi-Commercial Mortgages: Shops With Flats and Mixed-Use Property