Buying a flat above a shop or restaurant can often present you a great deal as a buyer. But you might also find that some questions arise during your mortgage application. With that in mind, we decided to put together a very quick guide about how you can get a mortgage on a flat above a shop, restaurant, or any other commercial premises.

Mortgages on flats above restaurants and shops

Can I get a mortgage on a flat above a shop? You can get a mortgage on a flat above a shop or restaurant. However, most mortgage lenders will have some lending restrictions. Any lender looking to lend on a flat above a shop will have a number of questions about the type of business, not only on the ground floor of the property you are buying, but also those in the immediate vicinity.

If you’re looking to apply for a mortgage on a flat above a restaurant or shop, you might find these questions overwhelming. By using a specialist adviser, they can guide you on the type of things to look out for so that you don’t waste time and money trying to raise money with unsuitable lenders.

Why mortgage lenders are fussy about lending on flats above shops

When you want to get a mortgage on a flat above a shop, unfortunately it is not uncommon for lenders to have restrictions in place for lending. They are often a lot more careful about lending on properties which may be adversely affected by the activities being carried out at nearby commercial businesses.

For example, lenders may be concerned that a takeaway will cause late night noise, anti-social behaviour, increased litter and of course cooking smells. A lender may take the view that these factors could have a negative impact on the area and therefore limit its appeal to future buyers.

So to be clear, it is not just the business which is run from the ground floor of your property which a lender will take into consideration, the types of business in the area near to the property will also influence a lenders decision on whether to offer a mortgage.

A mortgage is a relatively safe loan for a lender as the property represents the security for the mortgage. However, a lender will want to be sure that if they ever did have to repossess the property, they would be able to sell it and get their money back.

For this reason, a lender will want to make sure that they had a good chance that in normal market conditions there would be plenty of potential buyers for a repossessed property – including flats above shops and restaurants.

To help make a lending decision a lender will  instruct an independent valuation of a property and the report provided by the valuer will give the lender information on the local market, what similar properties have sold for in recent times, and comments on any other factors that could affect the future saleability of the property.

It is the information in this report which help the lender decide whether they are willing to let you get a mortgage on a flat above a shop.

What mortgage choices are available for flats above shops?

Many lenders have specific policies when it comes to lending on properties above commercial premises including restaurants and shops. A specialist adviser can help you by explaining what options can be offered by the different lenders available.

There are high street lenders and specialist semi-commercial lenders who offer these types of mortgages, so there is choice if you know where to look.

An experienced mortgage adviser will have most likely dealt with this type of application previously and will therefore have first-hand knowledge of which lenders are most likely to lend.

It is important to know that you will often have to put down a minimum deposit of 20% of the property value, it is not possible to buy these properties without a substantial deposit.

Can I get a quick mortgage decision?

The best thing you can do is a little research so that you can approach your mortgage adviser with the information they will need to give you informed advice. There are a number of things you can do which will speed up the decision on whether you are likely to get a mortgage on the flat above a restaurant or shop.

  • Find out what business are run from the ground floor of your property and also those 3 doors either side and immediately opposite. Your adviser can check the street scene using Google Earth, but these are not always completely up to date.
  • If you are purchasing the property, ask the selling agent what they know about the history of the property and whether they know if other people have had problems in getting a mortgage.
  • Does the property have its own independent entrance? The access, e.g. does it have its own private front door? If your flat does, then it will be nicer to live in and easier to sell than those whose main entrance is in a dark alleyway, behind the premises, or, worst of all, through the shop itself.

Should I buy a flat above a shop?

Obviously, this is a decision only you can make, and it will be based on a lot of factors, however many people will think that this type of property has a lot of advantages:

  • These types of properties can make excellent investments for the rental market as they tend to be located where the jobs are.
  • Younger buyers in particular tend to be attracted to areas that have good shopping amenities, cafes restaurants etc
  • As this type of property tends to be cheaper than traditional houses it may enable you to move into an area that you could not otherwise afford.

Get the right mortgage advice

Specialist Mortgage Online can put you in touch with an expert mortgage adviser who will quickly let you know what mortgage options you may have.

As previously mentioned, a little early research on your part will help enormously to make sure that the adviser finds the right mortgage lender for you. A good mortgage adviser will help you with that research and guide you on the types of things to look out for.

By not getting the right advice you could be risking your own time and money. For example, a lender will most likely charge you a survey to have the property inspected by an independent valuer. That money will be wasted if he valuer reports that the property would not be suitable security for that particular lender.

Contact SMO now and we will put you in touch with the right adviser.