Semi-Commercial Mortgages London
The shop with flats above is the single most common commercial mortgage deal in London, and semi-commercial is the product that funds it. One facility across the whole building where residential is 40% or more of floorspace, up to 75% LTV at 6.5 to 8.5% pa. We arrange the unregulated cases where the residential element is let at arm's length. Where the borrower or a family member will live in the flat, the deal moves inside the FCA's regulated perimeter and we refer it to a regulated firm.
LTV
70 to 75%
Cover test
Blended ICR 140 to 150%
Rate range
6.5 to 8.5% pa
Facility
£150K to £3M
Underwriting a London semi-commercial commercial mortgage
Semi-commercial is the product for a building where commercial and residential sit under one title and the residential element is at least 40% of total floorspace. In London that describes an enormous share of the built stock: the Victorian and Edwardian parade, built with a shop at street level and two or three floors of living space above it, repeated along every high street from Enfield to Croydon and from Hounslow to Bexley. It is the most frequent enquiry we take, by a wide margin.
The reason semi-commercial prices better than pure commercial investment on the same building is straightforward risk arithmetic. If a shop goes dark, re-letting it takes months and may require a rent concession. If a flat goes vacant in London, it re-lets quickly. That residential floor under the income is worth real money to a lender, and semi-commercial routinely prices inside comparable pure commercial investment as a result, reaching 75% LTV where a wholly commercial equivalent might cap at 65 or 70%. The cover test is blended: commercial rent and residential rent both tested against stressed interest, typically at 140 to 150%. Lenders differ on whether they blend the two streams into one ratio or test them separately and take the weaker, and on the same building that choice can move the loan amount meaningfully.
One structural point every borrower needs to understand before anything else. Commercial mortgages are unregulated lending and fall outside the FCA's regulated mortgage perimeter. That is the territory we work in, and we do not hold FCA authorisation because the products we arrange are unregulated. Semi-commercial carries the one genuine exception. Where the borrower or an immediate family member will personally occupy the residential element, the deal moves inside the regulated mortgage perimeter and is no longer a commercial mortgage at all. The classic case is the independent retailer buying the freehold of their shop and living in the flat above: that is a regulated case and we refer it to a regulated firm. The same building bought as an investment with the flat let to an arm's-length tenant is unregulated and sits squarely in our scope. We establish which one you are in at the first conversation, not three weeks into legals when it costs you a valuation fee.
London is also manufacturing new semi-commercial stock through Class MA, the prior-approval route that converts Class E commercial floorspace to residential. The output is very often exactly this asset. Enfield application 26/02944/PRG proposed converting the first floor of 312 to 314 Green Lanes, London N13 5TT from commercial to two residential dwellings, leaving the ground-floor trade in place. In Tower Hamlets, application PA/26/00846/S proposed three self-contained flats at first and second level at 134 to 136 Commercial Road E1 1NL. In Ealing, application 262575FUL at 222 Horn Lane, Acton W3 6TG involved subdividing part of the ground and lower-ground commercial areas alongside new residential. Every one of those becomes a semi-commercial refinance candidate once the works finish and both elements are let. The funding for the intervening period is a bridge at 8.5 to 11.0% pa with the term-out agreed in advance, not a term mortgage.
For product mechanics in more depth see our semi-commercial service page. Where the residential element above is run as a house in multiple occupation rather than as self-contained flats, the deal moves to the HMO block product with a different lender pool. Where residential is under 40% of floorspace, see mixed-use.
Semi-commercial assets we fund
Shop with one or two flats above
The defining London high-street asset, found on every borough parade. The deepest lender pool of any commercial mortgage product and the most competitively priced at 70 to 75% LTV.
Retail with three or more flats above
Larger parade buildings where residential dominates by floorspace but the ground floor still trades. Blended ICR underwriting, and the residential weighting has to be tested by income as well as by area.
Restaurant or takeaway with flats above
Common across London high streets. Sits as unregulated semi-commercial where the accommodation is let at arm's length. Extraction, licensing and hours conditions on the ground floor all get read by the valuer.
Office or Class E with residential above
Very often the product of a Class MA prior-approval conversion, with commercial retained at ground floor and new flats over. Needs both elements let before term debt is available.
Part-vacant semi-commercial acquisition
Empty shop, empty flat, or both. Funded by a bridge covering purchase, refurbishment and the letting void, with an agreed term-out onto semi-commercial once income is in place.
Conservation-area and listed parade stock
A large share of London's parade buildings sit within conservation areas. Fundable on normal terms, but the repairing obligation needs to be quantified before a lender will price it.
Finance structures for London semi-commercial
A single semi-commercial facility across the whole building is the primary route on unregulated cases, meaning the residential element is let to an arm's-length tenant or to a company. Part-vacant buildings route through a bridge with an agreed term-out. Cases where the borrower or a family member will occupy the residential element fall inside the FCA's regulated perimeter and outside our scope, and we refer those to a regulated firm.
Owner-occupier commercial mortgage
Where the borrower's business trades from the property. EBITDA cover at 1.3 to 1.5x, LTV to 75% on bricks.
Commercial investment mortgage
Let assets, ICR-led underwriting at 140 to 160% stressed cover, LTV 65 to 75%.
Commercial bridging
Vacant or value-add acquisition with an agreed term-out onto an investment mortgage once the letting is in place.
Commercial remortgage
End of fix, lender exit or capital raise on an existing asset. Rates 6.0 to 8.0% pa.
The London semi-commercial estate
Semi-commercial is the most common commercial mortgage deal in London because it is the most common London building. The 2021 London Plan classifies 201 activity centres across the capital, and the great majority of the floorspace in the District and Major centres is parade stock built between the 1860s and the 1930s with a shop below and living space above. Green Lanes running north through Haringey and Enfield, Uxbridge Road through Ealing and Acton, Commercial Road and Whitechapel Road through Tower Hamlets, Rye Lane and Peckham High Street in Southwark, Streatham High Road in Lambeth, the High Street through Bromley and North End in Croydon: all of it is the same asset in different postcodes. Two forces are keeping the stock alive. Class E, introduced in September 2020, means the ground floor can move between retail, café, clinic, gym or workspace without a planning application, so a vacant unit has real alternative uses. And Class MA prior approval is adding residential above retained commercial, as at 312 to 314 Green Lanes N13 5TT (ref 26/02944/PRG) and 134 to 136 Commercial Road E1 1NL (ref PA/26/00846/S). The practical consequence for a buyer is that these buildings rarely sit empty for long, and that is precisely why lenders price them keenly.
Lender appetite for London semi-commercial
This is the most competitive part of the London commercial mortgage market. InterBay Commercial is the most consistently active named lender on the shop-with-flats-above archetype, quoting to 75% LTV at the keener end of the 6.5 to 8.5% band where both elements are let and the commercial covenant is reasonable. Shawbrook, Aldermore, YBS Commercial, Hampshire Trust, Cambridge and Counties and Paragon all hold real appetite on let residential cases, each with a different minimum loan size, LTV cap and stance on the commercial covenant. Together covers the harder profiles: a vacant flat at acquisition, a short lease tail on the shop, a takeaway or licensed use at ground floor, at the top of the band. NatWest, Lloyds, Barclays and Santander will engage where the building is larger, well let and the commercial covenant is strong, typically at 6.5 to 7.5% pa. Cases that fall inside the regulated mortgage perimeter, meaning the borrower or a family member occupies the residential element, are outside our scope and we refer them to a regulated firm.
Semi-Commercial FAQs
Buying or refinancing semi-commercial in London?
Free-of-charge scheme assessment. Indicative terms within 48 hours.