arrowright roundtick plus plus house 66 . 7 % cornercurve

Don't let a mortgage get in the way...

Mortgage Next to a Commercial Property

Can I get a mortgage for a home next to a commercial property? Talk to one of the expert advisors we work with

Get Started
continue to article

By Pete Mugleston   Mortgage Advisor

Last updated: 28th March 2019 *

We get lots of enquiries from people who want a mortgage for a flat above commercial premises. Often they have found buying a flat above a shop or restaurant difficult because some lenders don’t offer mortgages for these properties. The good news is that there are options available.

We have gathered all of the key information you need to know about how to get a mortgage for a flat above a commercial property :

  • Can you get a mortgage for a flat above shop?
  • Is it difficult to get a mortgage for a flat above a shop?
  • What will lenders look at when assessing my application for a flat next to a commercial property?
  • How much deposit is needed on house next to a commercial property?
  • Getting a mortgage with bad credit on property next to commercial property
  • Speak to an expert about getting a mortgage for a flat above a shop

For the right advice on getting a mortgage for a flat above a chip shop or any other commercial property, speak to an expert. The advisors we work with are experts and can find lenders who are more likely to approve you. Contact them here for advice on this.

Can you get a mortgage for a flat above shop?

Yes - there are specialist lenders willing to offer this, but first let’s outline the benefits and potential pitfalls that this type of deal can come with...

Pros for getting a mortgage for flat above a shop

Could potentially buy a property at great value as these these properties are typically less expensive compared to properties that are not above or next to commercial sites.

Depending on the type of commercial property  there could be no noisy neighbours after hours/weekends.

The neighbours could be the business owners. Professionals who have an invested interest in staying long term may be more likely to be good neighbours i.e. be quiet, respectful.

Having a property above a shop could mean that you are close to other local amenities such as shops, restaurants or local transport

Cons for getting a mortgage for flat above a shop

If the property is situated above a restaurant, there could be unpleasant smells and noise . The business below the property could receive lots of deliveries at early hours of the morning. Often such properties can have less pleasing aesthetics including litter, bins or advertisement signs.

These properties can be more difficult to sell on and are more likely to drop in value in a declining market

Is it difficult to get a mortgage for a flat above a shop?

Most lenders are unwilling to approve a mortgage for properties above a commercial because often they can be impacted by smell, which makes flats over takeaways harder to finance. Some lenders will consider mortgages for a flat above a commercial property , depending on how many floors above they are, and the area in general.

Some lenders may be more likely to approve a mortgage next to a commercial property in central areas such as London where these properties are in high demand, compared to areas where the property is in a small town with less demand.

What will lenders look at when assessing my application for a flat next to a commercial property?

When applying for a mortgage it can be helpful to know the things that can affect your eligibility. These things can include:

  • Income
  • Employment
  • Age
  • Credit history
  • Type of property you’re buying
  • The type of commercial property it’s above/next to

For more information on how each of these factors can affect your mortgage application, it’s best to talk to an advisor. Contact us here and we’ll put you in touch with an expert who has specific experience with your query.

How much deposit is needed on house next to a commercial property?

The amount of deposit required for a property can vary depending on many factors including the property price, the lender, your affordability and your credit score.

Most lenders request a maximum Loan to Value (LTV) of 90 - 95%, meaning that they will lend 90 - 95% of the property value if you can pay a 5-10% deposit. For example, if the property was £100,000 and a lender was able to provide a mortgage with a LTV of 90%, you would need £10,000.

Will I need a bigger deposit if my finances are more complex?

If you have a more complex financial situation, for example if you are self employed, have fluctuating income or have adverse credit, a lender who specialises in mortgages for that particular niche may be more likely to approve your application. Some lenders like this may ask for a higher deposit of around 15 - 25%, depending on your circumstances.

Therefore, potentially you could be asked for a larger deposit but this really does depend on the lender as well as many other factors.

For example, if you have bad credit, the type of credit and date of the occurrence can affect how a lender assesses your likelihood to be able to make your mortgage payments. To make your payments more manageable and therefore easier to keep up with they could ask for a higher deposit which would make the overall loan smaller.

Getting a mortgage with bad credit on property next to commercial property

Below is a list of potential credit issues you may be faced with as a borrower, where it may be possible to still obtain a mortgage.

  • Low credit score
  • Late payments
  • Mortgage arrears
  • Defaults
  • CCJs
  • Debt management plans
  • IVA
  • Bankruptcy
  • Repossession

Customers with bad credit can often be seen as a higher risk to lenders, which can make getting a mortgage for a flat or house next to a commercial property even more difficult. Thankfully, the experts we work with have helped lots of customers get mortgages, even with bad credit including CCJs and Bankruptcy.

For more information on how we can help, see our bad credit information section here

Buy to let mortgages for flats above shops

We have also helped many homeowners get approved for mortgages on Buy to Let properties above shops. These types of mortgages can be deemed as higher risk to lenders but most Buy to Let lenders will offer a Loan to Value (LTV) of 75%, meaning that you’ll need a 25% deposit. However, some will consider just 20% and a handful will consider a 15% deposit in the right circumstances.

Check whether the shop owner is the freeholder

In some cases, the business owner of a shop or restaurant is also the leaseholder of the property above. This could mean that your right to occupation and use of the flat has a fixed period, usually 99 - 125 years. Once this period has ended, the ownership of the flat reverts back to the leaseholder, also known as the freeholder.

You may also be liable to pay a service charge which can increase over time. This is an important factor to consider if you buy a flat with a freeholder, so always check the terms of contract before you buy the property.

Speak to an expert about getting a mortgage for a flat above a shop

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 28th March 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.