Looking to buy or renovate a mixed-use property but finding traditional lending options limiting?
You’re not alone.
Mixed-use properties – like shops with flats above or office-residential combinations – often present unique financing challenges. Bridging finance offers a practical solution that’s becoming increasingly popular among property investors and business owners across the UK.
Whether you’re eyeing an auction opportunity or planning a conversion project, bridging finance can provide the quick, flexible funding you need. Let’s look at how these loans work for mixed-use properties and how you can use them effectively.
Mixed-Use Properties Explained
Mixed-use properties blend commercial and residential spaces within the same building.
Common examples include:
- retail units with apartments above
- office buildings with penthouse flats
- or leisure facilities combined with living quarters
These properties are fixtures of British high streets and town centres, offering unique opportunities for investors and business owners alike.
The appeal of mixed-use properties lies in their versatility.
They can provide multiple income streams through different types of tenants, while also offering potential for value addition through renovation or conversion. However, this same versatility will make them trickier to finance through conventional routes.
Mainstream mortgage lenders often struggle with mixed-use properties because they don’t fit neatly into either residential or commercial lending boxes.
Each part of the property might need different assessment criteria, and traditional lenders aren’t always well-suited to handle this complexity.
Why Bridging Finance Works for Mixed-Use Properties
Bridging finance fills this gap perfectly.
These short-term loans can be arranged quickly and offer flexibility that standard mortgages can’t match. Bridging finance providers look at the bigger picture rather than trying to pigeonhole properties into strict categories.
What makes bridging finance particularly suitable?
First, it’s fast.
While a commercial mortgage might take month or so to arrange, bridging finance can be secured in a matter of weeks or even days. This speed makes it ideal for time-sensitive purchases, like auction properties or off-market opportunities.
The flexibility extends beyond just quick completion times.
Bridging lenders understand that mixed usage properties often need work before they can generate income or qualify for long-term finance. They’re willing to lend against the property’s potential value, not just its current state.
Let’s talk bridging loans!
How Mixed-Use Bridging Finance Works
When you take out a bridging loan for a mixed-use property, the loan is secured against the property itself.
The amount you can borrow depends on the property’s value and condition, plus your plans for it. Most lenders will consider both the current value and the potential value after any planned improvements.
The loan period usually ranges from a few months up to three years. There are no monthly payments, everything is repaid at the end.
Fee structures include arrangement fees (a percentage of the loan amount), valuation fees, and legal costs. You’ll need to budget for these upfront expenses.
While costs are higher than mortgages, the flexibility and speed make bridging finance worth considering.
Read more: Bridging Loan Criteria & Eligibility
Who Can Use Mixed-Use Bridging Finance?
Property investors and developers commonly use bridging finance for mixed-use properties, but they’re not the only ones.
Business owners looking to buy premises with living accommodation above, landlords expanding their portfolios, and even first-time commercial buyers can all benefit from this type of funding.
You don’t need decades of property experience, but lenders will want to see that you understand what you’re taking on.
They’ll look at your exit strategy – how you plan to repay the loan – a lot more closely than your credit history.
Related: Understanding Bridging Finance for Buy-to-Let Properties
Common Uses and Examples
Let’s look at some real-world applications.
A recent client used bridging finance to buy a vacant high street shop with two flats above at auction. The quick funding meant they could comfortably meet the 28-day completion deadline, while the flexible terms gave them time to renovate both the commercial and residential spaces before refinancing onto a commercial mortgage.
Another investor used a bridging loan to convert a former pub into a restaurant with luxury apartments above. The bridging finance covered both the purchase and renovation costs, with the loan repaid through the sale of the apartments while retaining the restaurant for rental income.
Read more:
- What Can a Bridging Loan Be Used For?
- Bridging Finance for Unmortgageable Properties
- Student Accommodation: Using Bridging Finance for Development Opportunities
- Using a Bridging Loan to Buy at Property Auctions
- Can You Get a Bridging Loan to Renovate a House?
- Change of Use & Bridging Finance: A Guide to Property Conversion
Working with a Broker
While you can approach some bridging lenders directly, working with a broker often makes more sense for properties that mix residential with commercial.
They’ll know which lenders are most likely to consider your specific situation and can often secure better terms through their relationships.
Brokers bring valuable experience in structuring mixed-use property deals and can spot potential issues before they become problems. They’ll also handle much of the paperwork and chase progress with lenders, solicitors, and valuers.
Why is Financing Mixed-Use Properties More Difficult?
Getting finance for mixed-use and semi-commercial properties brings unique challenges that don’t apply to pure residential or commercial buildings.
Most high street banks prefer to lend on properties that fit neatly into one category – either purely residential or purely commercial.
Mixed-use properties blur these lines.
Think about a building with a retail shop downstairs and flats above. The residential part needs assessing based on local house prices and rental demand. Meanwhile, the commercial element requires analysis of business potential, lease terms, and the local retail market.
This dual nature makes risk assessment more complex for certain lenders.
Planning rules also add complexity. Changes between residential and commercial use often need permission, which affects both property value and future options. Lenders need to consider these planning aspects when making lending decisions.
Valuation presents another hurdle.
Mixed-use properties are harder to value because they need to account for the different usage, and the square footage for each one. There are often fewer direct comparisons available, making it harder for lenders to feel confident about property values.
Most standard mortgage products also come with restrictions that rule out mixed-use properties. Buy-to-let and residential mortgages require a property to be purely residential, while commercial mortgages might not suit properties with living space.
All these factors mean fewer lenders offer finance for properties that have a mix of uses.
Those that do often charge higher rates to cover their perceived extra risk. This is where bridging finance comes in as a practical solution – lenders in this space understand mixed-use properties and can take a more flexible approach to assessment.
Exit Strategies
Your exit strategy is how you’ll eventually repay the bridging loan and it needs careful planning.
Common approaches include:
- Refinancing to a long-term mortgage
- Selling part or all of the property
- Using proceeds from other property sales
- Securing long-term tenants to support traditional financing
The key is having a realistic timeline and backup plans. Your broker can help you assess different options and plan accordingly.
Read more: How Do You Pay Back a Bridging Loan?
Ready to explore bridging finance for your mixed-use property? Get in touch with our team to discuss your plans. We’ll help you understand your options and find the most suitable funding solution for your situation.
FAQ
A mixed-use property combines commercial and residential space in one building. Common examples in the UK include shops with flats above or office buildings with residential units.
While often used interchangeably, there’s a small difference. Mixed-use properties can combine multiple uses in one development, while semi-commercial usually means simpler two-purpose properties like shops with flats above.
For lending purposes though, most UK lenders treat them the same way.
Loan amounts start from £150,000 with no standard upper limit. The amount available depends on the property’s value, condition, and your exit strategy.
Read more: How Much Can I Borrow on a Bridging Loan?
Most lenders require 25-30% of the property’s value, though this can vary based on the property type and your circumstances. A higher LTV may be available if you have other properties to offer as loan collateral.
Common exits include refinancing to a commercial mortgage, property sale, or rental income supporting long-term finance.
Read more: How Do You Pay Back a Bridging Loan?
Yes, many lenders will consider funding both purchase and renovation costs for mixed-use properties.
Yes, bridging loans are well-suited for auction purchases where quick completion is essential.
Read more: Using a Bridging Loan to Buy at Property Auctions
Yes we can assist with that style of funding.
While considered, credit history is less important than your exit strategy and the property’s value.
Read more: Do You Need a Good Credit Score for a Bridging Loan?
