Semi-commercial remortgage guide

What a semi-commercial remortgage is

A semi-commercial remortgage replaces the existing mortgage on a mixed-use property with a new facility, often with a different lender. The property stays the same; the loan against it changes.

It is sized the same way as a purchase loan, on the combined commercial and residential rent at an interest cover ratio, or on the trading business for an owner-occupier, up to a 70 to 75 percent loan to value.

Why remortgage a mixed-use property?

• Release equity from a property that has risen in value, to fund another purchase
• Move to a better rate when an existing deal ends or the market improves
• Exit a bridge onto a long-term semi-commercial mortgage
• Raise capital for works or to improve the commercial unit
• Move the property into a limited company or restructure the borrowing

Releasing equity through a remortgage

Where a property has grown in value or the rent has risen, a remortgage can release equity up to the 70 to 75 percent loan to value ceiling. The released cash often funds the deposit on the next acquisition.

The new loan must still pass the interest cover ratio on the combined rent at the higher balance, so the rent has to support the larger loan you are drawing.

Moving off a bridge or a high rate

A bridge is short-term and dearer, at around 8.5 to 11 percent a year, so refinancing onto a term semi-commercial mortgage at 6.5 to 8.5 percent cuts the cost once the asset is ready.

Equally, where an existing term deal is ending or sitting on a high reversion rate, a remortgage onto a fresh deal can lower the rate, provided the property and income still support the loan.

What lenders need for a remortgage

1. An up-to-date valuation confirming value, the commercial-to-residential split and the rent
2. The leases and rent roll on both parts
3. Evidence the combined rent clears the interest cover ratio at the new loan
4. The borrowing structure, personal or limited company, and any guarantees
5. A clean payment history on the existing loan

A well-let property with documented leases and a clear rent roll refinances quickly; a part-vacant or recently changed property needs more support.

Costs of remortgaging

A remortgage carries similar costs to a purchase, minus the stamp duty in most cases:

Check any early repayment charge on the current deal, because it can outweigh the saving from moving early. We weigh the all-in cost of switching against the benefit before you commit.

How long a remortgage takes

A straightforward semi-commercial remortgage commonly takes a few weeks to a couple of months, driven by the valuation, the legal work and the lender's underwriting.

Starting early, with the leases, rent roll and accounts ready, is the single best way to keep a refinance on track, especially where it is the planned exit from a bridge with a deadline.

Remortgage

Replacing an existing mortgage with a new one, often with a different lender, on the same property.

Equity release

Drawing additional borrowing against the increased value or equity in a property.

Early repayment charge

A fee for repaying a loan within its tie-in period, which can affect the timing of a remortgage.