Even in the best of times the semi commercial property niche is a tricky one when it comes to capital raising and refinance. Many mainstream lenders have recently withdrawn and repriced their products generally in wake of the rising interest rate environment and it seems appetite for some niche areas of lending has become even more limited than before.
A niche that we frequently receive enquiries for are those cases where the property is a single freehold title, in some cases the owners live in the residential part and operate a business in the commercial part, such as a shop with flat above or behind, or maybe it’s a retail unit subject to a lease with a self-contained flat or flats above subject to AST. Either way there is a distinct lack of lenders who accept these property types.
The purpose of the borrowing also makes a huge difference, whether for business purpose or personal. For personal borrowing and refinancing, if the property consists of residential floor space greater than 40%, is owned and occupied by the borrower or immediate family a regulated first or second mortgage is required. If the property is let out and meets the lender’s occupancy requirements a BTL first or second or (if no other investment properties are owned, a CBTL first or second) may be possible.
For business purpose borrowing by incorporated businesses and partnerships a secured business loan may be possible on an unregulated basis with the owners acting as guarantors.
In some cases, however, the property itself is owned by a company or partnership in which case the business, as the named borrower, will provide the security rather than the directors or partners on a personal guarantee.
Whatever the property and ownership circumstances, other aspects of a case may determine the best route to be taken. If the borrowers have good existing terms for any first mortgage on the property, leaving this in place and raising funds with a second charge may be best. In some circumstances there may already be a second charge in place which the borrowers would rather not be forced to repay. With relevant consent and deed of priority a third charge may be possible.