The Client
The clients were experienced landlords looking to purchase their first semi-commercial property. They had a large amount of outstanding credit in their personal names, but a good level of net worth and equity across their residential and investment properties. Both applicants were self-employed with a clean credit history.
The Scenario
The property consisted of two commercial units on the ground floor and a large flat above, producing a yield of 11.5%. The clients also owned several leasehold flats in the same area, sitting above a separate commercial unit, though the freehold to these flats was held under the commercial title. The clients had negotiated the purchase of this commercial unit to obtain the freehold themselves, but since the unit was vacant and had a very small capital value, sourcing a lender to provide borrowing on it alone would not have been an option.
The Solution
Having already sourced a commercial lender for the semi-commercial purchase, we were able to get the lender to add the individual commercial unit onto the same mortgage, allowing the clients to purchase both properties under a single loan. This secured the clients two new commercial investment properties, as well as the freehold of their existing leasehold flats. A 75% LTV mortgage was secured on an interest-only basis over 25 years.
Summary
The commercial investment market has grown in popularity in recent years, though the mortgage process involves considerable complexity, and most lenders will only lend through commercial mortgage brokers. Whether you are in the market for a commercial property, or looking to remortgage an existing one, speak with our experienced brokers, who can bring years of commercial lending experience to your investment journey.
Frequently Asked Questions
Can two commercial properties be combined onto one mortgage?
Yes, in some cases a lender will add an additional property onto an existing mortgage rather than requiring a separate loan.
This can work particularly well where one property alone would be too small or too low in value to secure standalone borrowing.
Can I buy a commercial unit purely to obtain a freehold I do not currently own?
Yes, this is a genuine and fairly common reason for purchasing a small commercial unit.
Where existing leasehold flats sit under a freehold owned separately, buying that freehold can bring long-term control and value, even where the unit itself has limited capital value on its own.
What yield is typically needed for a semi-commercial mortgage to work?
There is no fixed minimum, but lenders will want to see the rental income comfortably support the mortgage payment.
An 11.5% yield, as in this case, sits well above what most lenders would need to see for affordability purposes.
Can I get an interest-only commercial mortgage?
Yes, interest-only terms are common on commercial and semi-commercial mortgages, particularly for experienced investors.
Lenders will want a credible repayment strategy in place for the capital, since interest-only means the loan balance itself does not reduce during the term.
Commercial Finance Network is a whole-of-market FCA authorised commercial finance broker working with property investors, developers, and businesses across the UK and internationally. We work across the full specialist commercial mortgage panel and will tell you which lenders will engage with your deal, what LTV and rate to expect, and how to structure the application before anything is submitted.
Commercial Finance Network is directly authorised and regulated by the Financial Conduct Authority. Your property may be repossessed if you do not keep up repayments on a loan secured against it. Commercial and business-purpose lending secured against investment property is not regulated by the Financial Conduct Authority.
Call us on +44 1494 622 111 or email info@cfnuk.com to speak to a specialist directly.
Related Pages
- Commercial Mortgages – whole-of-market advice for commercial property purchases
- Semi-Commercial Mortgages – financing for mixed commercial and residential use properties
- Commercial Mortgage Calculator – estimate affordability and stress-tested borrowing
- Commercial Mortgage Rates – current rate ranges by LTV band and property type
