Getting A Mortgage On A Flat Above A Shop

Find out how to get a mortgage for a flat above a shop and how a specialist broker can help you

Firstly, what type of business is below the flat?

Home Property Types Getting A Mortgage On A Flat Above A Shop
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: March 18, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 18, 2024

A flat above a shop or other type of commercial premises could be an attractive location for those looking to buy a cheaper property or live close to amenities. It is also a good option for landlords as renters often like a central location.

In this article, we’ll explain what is unique about getting a mortgage for a flat above commercial premises, how to submit a strong application, and why a broker can help secure you a loan and save you money.

Can you get a mortgage on a flat above a shop?

Yes. While not all lenders will approve a loan to buy a flat above commercial premises, there are both mainstream and specialist providers who will consider this type of home loan.

However, your pool of potential lenders is somewhat limited as some are concerned about the resale value in the event of repossession. This is because they deem flats above commercial premises harder to sell due to possible issues with:

  • Noise
  • Smells
  • Unsocial hours of operation
  • Increased risk of fire from some commercial properties such as restaurants

Most flats above shops are also leasehold. This presents lenders with the additional time and cost involved in examining the terms of the lease to pre-empt possible changes, so some simply choose not to lend on these types of properties.

Leasehold costs for commercial buildings are usually higher than those for residential, so it could also impact affordability.

Usually, the most difficult part of getting the right mortgage for a flat above a shop is finding the best lender. And the key to that is finding the right broker.

Using our broker matching service, you’ll be matched with a broker who specialises mortgages for properties above a commercial premises who and knows which lenders to approach, and how to submit your application for the highest chance of approval.

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We know everyone's circumstances are different, so if you have a specific question about getting a mortgage for a premises above a shop then get in touch.

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The key factors that influence lending decisions

Aside from their standard eligibility criteria (which we’ll explain later), lenders will want to know the type of commercial property the flat is connected to.

Commercial premises fall into several categories, with those in question here typically being one of five:

A1 General shops such as grocery stores and newsagents
A2 Professional services such as offices or banks
A3 Restaurants, cafes etc
A4 Pubs, bars and drinking houses
A5 Hot food takeaways

A1 are considered the least problematic, while A5 are of most concern to lenders, so it’s important to understand each provider’s approach to lending before submitting an application.

Other commercial premises categories are:

B Light industrial
C Commercial residences (i.e. hotels or nursing homes)
D Leisure facilities (i.e. cinemas and gyms)

Properties above or close to these types of premises can also be challenging when it comes to getting a mortgage, for the reasons we’ve outlined in the previous section.

General eligibility factors

Eligibility factors are determined by lenders but typically include:

  • Employment status
  • Level of deposit
  • Credit file – bad credit increases the risk to lenders which limits those who will accept you

Due to lenders’ concerns over resale value, the required deposit is usually at least 15% for a flat above an A1 commercial premises. For properties above A2 – A5 properties, this may be higher.

In addition to the business type, lenders will take into consideration:

  • Location – a flat above a shop in Kensington will be more desirable than one on a London housing estate
  • Access and security
  • Whether the property is directly above the shop or has at least one floor in between
  • What type of shops are adjacent to the one underneath
  • Whether the property is self-contained
  • Whether the title deed is separate from that of the commercial premises
  • The operating hours of the business
  • The length of the lease

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How a broker can help find the right lender for flats near commercial premises

Most borrowers are not up to speed with the lending attitudes of the UKs mortgage providers, which is why it makes sense to speak to a broker – particularly when looking for a niche product like a mortgage for a flat above commercial premises. Going it alone and being rejected can harm your credit file and reduce your chances of acceptance on any subsequent applications.

A whole of market broker who specialises in arranging finance for flats in close proximity to commercial properties will assess your situation, and those of the property you’re buying, before deciding which provider to approach. And their knowledge of the market can help make sure you get the best deal possible too.

  • HSBC
  • Halifax
  • Nationwide
  • Natwest
  • Santander (only accept applications via a broker)

There are also several specialist lenders. Some will consider applications regardless of the category the property falls into, while others will only accept applications for flats above an A1 premises.

A broker can help identify the right lender and product according to your circumstances.

How much can you borrow?

The maximum you can borrow is determined by your income and expenditure, but the property type – in this case a home above or next to a commercial premises – can have an indirect impact.

Typically, lenders will lend up to four and a half times your salary, but some will go as much as six times income. Given that there are fewer lenders for properties above or beside a commercial property, you might be more limited on the income multiples you can access, compared to someone buying a standard home.

Again, each lender has their own way of calculating income with some taking into account supplementary income and others only calculating affordability based on regular wages or self-employed accounts.

You can find out more about how affordability is calculated in our guide to maximum mortgage borrowing.

What will the repayments be?

The amount of your monthly repayments will depend on your interest rate and term. Rates for mortgages on flats above shops tend to be higher than on other residential properties.

You can find out how the rates and terms available will affect your monthly payments using our mortgage repayment calculator.

Mortgage Repayment Calculator

This calculator can tell you the monthly and overall cost of your mortgage, based on the loan amount, interest rate, and term length.

Enter the amount you're borrowing
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Enter the mortgage rate, 5.5% is a typical rate currently but this can vary
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Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms
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Your Results:

The monthly repayments on a mortgage would be

The total amount paid at the end of your mortgage term would be

Get started with an expert broker to find out how much they could help you save on your mortgage repayments.

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Can you get a mortgage for a flat and a shop?

Yes. If you are looking to buy a shop and the flat above it – or already own one of the two and are now buying the other, you can apply for a mixed-use mortgage (or semi-commercial mortgage).

This might be a good option for buy-to-let landlords who want to have control over both aspects of the building.

A mixed-mortgage application is slightly different as you will need to provide details about your business in addition to your personal finances. Find out more in our guide to semi-commercial mortgages.

Get matched with a broker who specialises in flats above commercial premises

Often, the hardest part of getting the right mortgage for a flat above a shop is finding the best lender. And the key to that is finding the right broker.

With our unique broker matching service, you’ll be paired with a broker who specialises in this type of mortgage and knows which lenders to approach, and how to package your application for the maximum chance of approval.

To get matched with a broker who specialises in flats above shops and commercial premises, call today on 0808 189 2301 or enquire online to arrange a free, no-obligation chat.

Maximise your chance of approval with a broker who specialises in mortgages on flats above commercial premises

Get Started

Ask us a question

We can help!

We know everyone's circumstances are different, so if you have a specific question about getting a mortgage for a premises above a shop then get in touch.

Ask us a question and we'll get the best expert to help.

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FAQs

It’s possible, but not all government schemes will be eligible. You could use a Lifetime ISA or the Right to Buy a council property, but schemes such as Help to Buy and Shared Ownership would not be suitable. A broker will let you know of any possible discounts when they assess your circumstances.

Ask us a question

We can help!

We know everyone's circumstances are different, so if you have a specific question about getting a mortgage for a premises above a shop then get in touch.

Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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