Semi commercial bridging loan for shops with flats and other part-residential buildings
A semi commercial bridging loan is short-term finance secured on a single building that combines commercial space with residential accommodation, such as a shop with a flat above, used to buy, refurbish or raise money on it before refinancing or selling. These buildings sit between two lending worlds, which is why the lender you choose, and the regulatory position of the loan, matter more than usual.
The most important question on any semi-commercial case is who will live in the residential part. That decides whether the loan is unregulated, which we arrange directly, or regulated, which must go to a firm directly authorised by the Financial Conduct Authority.
Key takeaways
A semi commercial bridging loan funds buildings with both commercial and residential parts, such as shops with flats.
If you or an immediate family member will live in part of the building, the loan may be regulated, so we introduce it to an FCA directly authorised firm.
Investor and business cases with unconnected tenants or empty flats are normally unregulated, and we arrange them directly.
The commercial proportion and the type of commercial use shape which lenders will lend.
Plan the exit, usually a semi-commercial mortgage, before you take the bridge.
)}
What is a semi commercial bridging loan used for?
Semi-commercial property is everywhere on British high streets. Typical security includes:
Shops with one or more flats above, on a single title or with flats on separate leases.
Offices or clinics with apartments on the upper floors.
Pubs and restaurants with living accommodation.
Parades of retail units with residential above.
Common reasons to use a bridge include buying at auction within 28 days, buying a building with a vacant shop that mortgage lenders will not touch, refurbishing tired flats before refinancing, converting unused storage above a shop into flats, and buying the premises for your own business. If the building has several different commercial uses, see our mixed-use bridging loans page; for retail units in general, see bridging loans for shops.
When is semi-commercial bridging regulated, and when is it unregulated?
This is the point that catches people out, so we deal with it first on every case. The test is about occupation of the residential part, not the type of building.
A bridge is a regulated mortgage contract where it is made to an individual or trustees and at least 40% of the property is used, or will be used, as a home by the borrower or an immediate family member such as a spouse or civil partner, parent, child, sibling, grandparent or grandchild.
That share can be finely balanced, so we introduce any case where you or your family will live in part of the building to a firm directly authorised by the FCA, which makes the right checks.
If the residential part is let to unconnected tenants, used by the business, or empty, and the borrower is an investor or business, the bridge is normally unregulated.
Scenario
Usual position
Who arranges it
Investor buys a shop with a flat let to an unconnected tenant
Unregulated
We arrange directly
Company buys a parade, flats empty pending refurbishment
Unregulated
We arrange directly
Shopkeeper buys their premises and lives in the flat above
Regulated if the flat is 40% or more of the property
A firm directly authorised by the FCA, which we introduce
Investor's adult child will move into the flat
May be regulated, depending on who borrows and the flat's share
A firm directly authorised by the FCA, which we introduce
Owner plans to move into the flat later in the term
Treat as regulated
A firm directly authorised by the FCA, which we introduce
Buying through a limited company does not automatically settle the question, because lenders apply their own policies where a director or their family will live in the property. We are not directly authorised by the Financial Conduct Authority, so we confirm the position at the outset and introduce regulated cases rather than arranging them. Our guide to regulated vs unregulated bridging explains the line in more detail.
How does the commercial proportion affect lender appetite?
Lenders look at how much of the building is commercial, measured by value, floor area or rental income depending on the lender. That proportion shapes who will lend and on what terms:
Mix
How lenders tend to treat it
Mostly residential, small commercial element
Widest choice of lenders; some treat it close to residential investment
Assessed as commercial property; the commercial occupier and lease matter most
Lenders also look at the type of commercial use. A convenience store or professional office below flats is mainstream. A hot food takeaway or late-night bar below residential accommodation narrows the field, because of noise, odour and fire risk. A good broker matches the building to lenders whose appetite fits, rather than sending it to every name on a list.
Have a deal in front of you?Send us the property and the numbers. We will tell you quickly whether it is fundable.
How do lenders value semi-commercial property?
The valuer reports a market value for the whole building, but in practice they build it up from its parts:
The commercial unit: on its rent and lease terms if let, or on vacant possession value if empty.
The flats: by reference to comparable residential sales or rents.
Access and layout: whether the flats have separate street access, which buyers and lenders both prefer.
Title structure: a single freehold title is simplest; flats already sold on long leases reduce the value to the freeholder.
Some lenders also ask for a figure reflecting a quicker sale. Our guide to bridging loan valuation explains the process and how to prepare.
How much can you borrow on a semi commercial bridging loan?
On a first charge, a semi commercial bridging loan is commonly up to 70% to 75% of value for standard buildings, lower for weaker locations or specialist uses. The arrangement fee is typically around 1% to 2% of the loan, and interest can be retained, rolled up or serviced from the rent.
If you already have a mortgage on the building and want to raise money without disturbing it, a second charge may work, with the first lender's consent. See our page on second charge commercial bridging. Where the bridge will fund conversion of upper floors into flats, works funding can be added and released in stages.
Use our bridging loan calculator to test a loan amount, then speak to us about which lenders suit your building.
What exit routes work for semi-commercial bridging?
Lenders will want to see one of these exits evidenced before they lend:
Refinance onto a semi-commercial mortgage. The most common route once the shop is let and the flats are tenanted. The commercial mortgage lender will look at rents, lease terms and the commercial proportion.
Owner-occupier refinance. If your business occupies the commercial part, the refinance is assessed on the trading accounts. See bridging to buy business premises.
Sale of the building after refurbishment or letting.
Sale of the flats on long leases, keeping the freehold and the commercial unit.
If the refinance will be regulated because you live in the flat, the exit must also be arranged through an FCA directly authorised firm, so plan both stages together.
What do you need to apply for a semi-commercial bridge?
Have these ready and a lender can issue terms quickly:
Property details: address, layout, floor areas, title and any leases.
Who occupies, or will occupy, the residential part. This decides the regulated or unregulated route.
Purchase price, deposit and source of funds.
Any works planned, with costs.
Your exit plan and supporting evidence.
Borrower details, including company documents if buying through an SPV, and credit history.
Adverse credit does not automatically rule you out of a semi-commercial bridge, but disclose it at the start.
Unregulated commercial and investment bridging is arranged directly. Any case where the security includes a home you or an immediate family member occupies, including a flat above commercial premises, may be regulated and is introduced to a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the Financial Conduct Authority ourselves. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
It depends on who lives in the residential part. If you borrow personally and you or an immediate family member will live in at least 40% of the building, the loan is a regulated mortgage contract. Where your family will live in the building at all, we introduce the case to a firm directly authorised by the Financial Conduct Authority. If the flats are let to unconnected tenants or empty, it is normally unregulated.
Can I live in the flat above my shop and use a bridging loan?
Yes, but the loan may be a regulated mortgage contract, depending on how much of the building the flat makes up. Regulated bridging must be arranged by a firm directly authorised by the Financial Conduct Authority, and lenders will assess affordability and your exit. We are not directly authorised by the FCA, so we introduce these cases to a firm that is.
What are semi commercial bridging loan rates like?
Pricing is per month and depends on the loan to value, the building, the commercial use and your profile. Lower LTV generally prices better, and mainstream uses such as shops and offices with flats attract more lender competition than takeaways or bars. See our rates page for how lenders price, and ask us for terms on your building.
Can I get a semi commercial bridging loan with bad credit?
Often, yes. Bridging lenders focus mainly on the property and the exit, so past credit problems are not an automatic bar. Recent or unexplained adverse credit narrows the choice and may affect pricing or loan to value. Disclose everything at the start, because problems that surface later can delay or derail the case.
Can I use a second charge on semi-commercial property?
Yes, if the existing first charge lender consents. A second charge lets you raise funds without refinancing a mortgage you want to keep. The combined borrowing across both charges is what the second charge lender assesses, so there must be enough equity. If you live in the flat, the second charge may be regulated, and we introduce it to an FCA-authorised firm.
Is a shop with a flat above treated as commercial or residential?
Lenders treat it as semi-commercial, and the share of the building that is commercial affects which lenders will lend. Mostly residential buildings attract a wider choice of lenders, while mostly commercial buildings are assessed more like commercial property. The type of commercial use also matters, with quiet daytime uses viewed more favourably.
