
Get exclusive money-saving offers and guides
Straight to your inbox
Updated
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
A mixed-use property is a property that has been zoned for more than one purpose, with the most common example being mixed residential and commercial zoning. In the inner city, such properties often take the form of a business downstairs with an apartment upstairs. In other areas, they may involve a freestanding home with one portion used as a shopfront and the other for family living.
So if you’ve found a mixed-use property that’s perfect for you and you need finance to buy it, what do you do? Will you need a residential home loan, a commercial loan or both?
The topic of borrowing money to buy a mixed-use property can be complex, so you’ll need to examine your situation closely before deciding on the most suitable borrowing approach.
The type of loan you’ll be offered for a mixed-use property varies depending on your situation, the lender and the property in question. While most lenders will classify mixed-use properties as commercial lending because of how the properties are zoned, others may decide to offer you a residential loan. With this in mind, it’s a good idea to speak to a number of lenders to see what type of loan they would be able to offer you and what features the loan would have.
The distinction between a commercial loan and a residential loan is important because the two different loan types attract different terms and conditions. Lenders tend to view commercial loans as being higher in risk, so they tend to attract lower maximum loan-to-value ratios (LVR) and higher interest rates than ordinary residential loans. Commercial loans are typically only available with shorter terms than residential loans, so you may have to repay the money you borrow over 15 years instead of 30.
In most cases, lenders will assess properties that have commercial sections, such as retail, office or manufacturing spaces, as commercial properties. This means they will offer you a commercial loan with a higher interest rate and lower LVR, but it pays to shop around to see what options are available.
The amount you’ll be able to borrow will be affected by a range of factors. First, the lender will take into account the price of the property you wish to purchase and your financial situation when deciding how much you can afford to repay. As always, the larger the deposit, the greater your borrowing power. Each lender will also have its own approach to lending on mixed-use properties, which will be affected by the level of risk it’s willing to accept when offering financing to a borrower.
You should also be aware that the maximum LVR available to you will be influenced by the type of property you are buying. For example, if the property you are buying is a normal house and is appropriately zoned for you to later convert it back to residential use only, you’ll typically be able to borrow up to 90% LVR.
If you want to rent out the residence attached to the commercial property, some lenders may offer you an LVR of as high as 80%. Otherwise, the maximum LVR you can access may be 70% or 75%, which will require you to save as large a deposit as you can.
There are a few simple steps you can take to ensure that you find the right loan to purchase your mixed-use property.
Less than 12 months since borrowers rushed to put their mortgages on hold, Aussies are paying more off their home loan than ever before
CommBank has announced a new green loan with a 0.99% interest rate, which you can use to buy and install renewable tech in your home.
More than 75,000 people have applied for HomeBuilder, far more than the government expected. Is it too late to apply now?
Our experts crunch the numbers to help you work out the best place to park your money: is it your mortgage or your super fund?
Lenders often give discounts to new borrowers, but not to loyal existing customers. Here's how to work out if you're being charged too much.
Your guide to home loan LVRs and how you can determine your loan to value ratio.
Do you have to tell your lender if you rent out a room and turn your mortgage into an investment loan?
Need an owner-occupier home loan? Compare rates, understand home owner tax rules and more.
Save yourself tax dollars with a Division 7A loan agreement.