Buying a mixed property. Do I apply for a residential or commercial loan?

Any general questions you might have in regards to loans and finance.
Mark
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Buying a mixed property. Do I apply for a residential or commercial loan?

Postby Mark » Mon Sep 30, 2019 4:59 pm

My name is Mark and I am looking to buy a property in ACT which has a small space for a retail shop, which I will be renting to someone else and I want to live in the apartment above it. Which loan do I apply for? Residential or commercial loan?

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Otto Dargan
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Re: Buying a mixed property. Do I apply for a residential or commercial loan?

Postby Otto Dargan » Mon Sep 30, 2019 5:21 pm

Hello Mark. Welcome to the forums.

While most lenders will classify mixed-use properties as commercial lending, they are others who can offer you a residential loan.

It is important to distinguish between the two loans as commercial loans are higher in risk and tend to have a lower loan to value ratio and higher interest rates than residential loans.

Most lenders will assess your property as commercial property as it has a retail shop on it. However, if the property is a converted terrace, it can be considered residential property and you might be able to apply for a residential loan.

If the property can be used as a home and the zoning allows the property to be converted to residential use, then you may be able to borrow up to 90% of the property value.

If you rent out the attached residence, then you can borrow up to 80% of the property value with a commercial loan.

You can apply for a retail commercial loan and you might even get a lower interest rate with some of our lenders.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a retail commercial loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Mark
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Joined: Mon Sep 30, 2019 4:57 pm

Re: Buying a mixed property. Do I apply for a residential or commercial loan?

Postby Mark » Mon Sep 30, 2019 6:22 pm

Ok, thanks for the info. Since my property has a retail shop, will it be valued higher?

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Otto Dargan
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Re: Buying a mixed property. Do I apply for a residential or commercial loan?

Postby Otto Dargan » Mon Sep 30, 2019 6:43 pm

Hi Mark,

The banks will look into the following factors to value your retail space:
  • The size of the shop as shops located in prime locations have larger floor space, so might be more expensive. However, banks are not conservative when it comes to shop size as any size can appeal to a business niche.
  • If a retail shop is located in a central business district with a good amount of foot traffic, then it's an indication of long-term tenancy.
  • In most cases, retail properties are zoned mixed-use which means they are typically located in Commercial 1 Zone.
Cheers
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Mark
Posts: 3
Joined: Mon Sep 30, 2019 4:57 pm

Re: Buying a mixed property. Do I apply for a residential or commercial loan?

Postby Mark » Mon Sep 30, 2019 7:06 pm

I did not think that the bank would factor in the tenants’ rent as well. Why do banks need to do this?

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Otto Dargan
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Re: Buying a mixed property. Do I apply for a residential or commercial loan?

Postby Otto Dargan » Mon Sep 30, 2019 7:44 pm

Hi Mark,

The lenders will need to know if the current tenants are running a profitable venture so they can keep paying rent and you can make your retail commercial loan repayments.

The lender will look into:
  • The profit and loss statements for the last two years.
  • Lease remaining on the property.
  • The type of business operating in the space.
Besides looking at your tenant's situation, they will also assess your financial situation to see if you can afford to repay the commercial loan. To do so, banks look at lending criteria like proving your income, credit history, employment status, etc.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a retail commercial loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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