Residences located on properties that are zoned industrial or commercial Zoning are classified as mixed-use properties. A typical example is a storefront located in the middle of a city or town with an owner-occupied apartment upstairs. Another example is houses converted into offices or retail or warehouses transformed into a creative space with a residence attached.
Loans
A borrower’s most significant hurdle to securing a loan for a mixed-use property is whether the bank or other lender views the property as high risk. These properties are not always in high demand, which can add to the risk level. In addition, banks typically want commercial Zoning properties to be leased in case of loan default. They also assess the following factors:
- The location
- The borrower’s financials
- The resale value and market demand
- For leased property, they will also evaluate the tenant’s borrowing strength and lease length
The banks will also require your client to meet all the criteria for a residential home loan while using their commercial Zoning risk matrix to determine how risky the loan is and the client’s borrowing power.
How much can you borrow?
Depending on the zoning of the property and how the applicant intends to use it, they may be able to borrow the following amounts:
- 90% for a house that is zoned industrial or commercial Zoning but can be rezoned as residential.
- 80% of a commercial Zoning loan if they plan to rent out the attached residence
- 75% of a commercial Zoning loan if they plan to live in the attached residence
- 75% if they will use the property for business only and they have strong business finances.
Depending on a borrower’s financial situation and how they intend to use the property, a traditional lender may deny their request for a mixed-use loan. Mortgage Street and our team of brokers can help. We are a non-bank lender who understands the ins and outs of mixed-use loans. As a non-traditional lender, we can help your client find a non-traditional loan with the best rates, even if traditional lenders have denied your application.