Getting a Mortgage on a Flat

Find out everything you need to know about getting a Mortgage on a flat above a shop and how a broker can help you

How will you be using the flat?

Home Property Types Getting A Mortgage On A Flat
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

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

The ability to get a mortgage on a flat will depend on a few different factors that you should be aware of, namely the stipulations from different lenders on different types of properties.

While it shouldn’t necessarily be more difficult than getting a mortgage on a house, there may be some hurdles to overcome according to your circumstances. A good mortgage broker who specialises in flats can help you through the process, but let’s help to make things clearer initially here.

Can you get a mortgage on a flat?

Yes, in theory, but whether your application is successful will depend on a few elements, and while different lenders do have varying degrees of amenability towards mortgages on flats, bear in mind that financing these kinds of properties are relatively commonplace.

With support from a specialist broker, you may find that it’s more straightforward than you think, however do bear in mind what lenders will look at when considering your application:

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Your affordability

Like all mortgages on every type of property, first and foremost banks want to be assured that you are able to afford to pay the mortgage back. They will need to be satisfied that you have an adequate income that will cover the monthly loan cost and that your typical outgoings don’t tip that balance towards financial inviability.

Read more about this in our detailed mortgage affordability guide.

Your eligibility

Lenders will also take into consideration your status on a number of criteria: how much you want to borrow vs the cost of the property (loan-to-value ratio); your age; what you do for a living; and your credit history.

What type of property you want to buy

The kind of flat you’re looking at will certainly have some bearing on whether you’ll be granted a mortgage. This is one of the biggest obstacles in mortgaging a flat, as lenders are always more wary of ‘non-standard’ properties.

The following types will have some bearing on your application and potentially the deal you end up with:

  • Studio flats: Might fall below the minimum size requirements.
  • Flats within commercial buildings: A valuers report might determine a mortgage outcome on flats above or inside shops, pubs and food establishments.
  • Ex-authority flats: Resale value might be an issue or the style of property (balconies, communal gardens etc).
  • High rises: Multiple storey flats can be an issue for some lenders.
  • Basement flats: Lenders must be satisfied with mortgageability via a report.

When the flat was built

New-build flats can be a stumbling block when it comes to getting a mortgage because of their tendency to devalue in price once they have been purchased initially. While it’s still possible with some banks, you may find that the loan-to-value ratios on new build mortgages will be lower, and therefore less attractive if you’re looking at mortgaging high.

Whether that property is freehold or leasehold

A freehold flat might cause you mortgage problems, whereas leasehold is much more straightforward. We will go into this in more detail further down.

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How a broker can help get a mortgage on a flat

When there are complexities within a mortgage application – such as a property type that not all lenders accept, like a non-standard flat – working with a specialist broker is always a good idea. Heading out alone into the mortgage wilderness can leave you confused, closed off to the market and ultimately unsuccessful.

Trying to get a mortgage on a flat is no exception. There are variants to understand, lenders to lean towards and deals to negotiate. Because there is the additional complication of property classification that comes into the eligibility criteria, you could end up with loan-to-value ratios or interest rates that are not ideal, or doors being closed to you altogether.

Experienced and niche brokers, like the ones we work with, know where to look, who to turn to, and can offer advice and practical support in strengthening your application. Whether you’re looking for a standard residential mortgage or a buy-to-let, or even if you’re looking at remortgaging a flat, get in touch with our team to get matched to the right professional today.

Getting a mortgage on a freehold flat

There are specific restrictions on these and the number of lenders willing to finance freehold flats falls dramatically. That said, there are a select few, including NatWest, Central Trust Limited, HSBC, Livemore Capital and Nationwide, who will look at them, so all is not lost if you have your heart set on a flat in this category.

Conditions around the flat’s legal arrangements, whether the freehold applies to the entire building, leases and tenancies within the remaining building, and a valuer’s report might come into play, and some banks will only offer freehold mortgages in Scotland, where freehold flats are more common than leasehold.

Why is this harder?

It all comes down to accountability. When you own a freehold flat, you essentially own that and the land it stands on, which can make buying, selling and maintenance complicated and open to dispute. Lenders much prefer leasehold flats because there is a clear view on who owns what in and around the flat, which is usually one singular land owner.

Which lenders will consider your application?

The majority of mortgage lenders out there are open to lending on flats, however it is the conditions that can be the stumbling blocks, as we’ve already outlined. While they mostly offer lower loan-to-value ratios than they do on houses as a general rule, most are still open to negotiation and different mortgage types, such as buy-to-let, commercial and interest-only.

What about remortgaging?

Remortgaging is usually much easier than getting an initial mortgage on a property and most lenders who are open to lending on flats will be open to talking about a remortgage. If your circumstances haven’t changed and your flat hasn’t fallen in price, this should be a relatively straightforward process. Whatever your reasons for remortgaging, it’s still wise to go through an independent remortgage broker to ensure you’re not halted by restrictions and unfavourable rates.

Getting a buy-to-let mortgage on a flat

All of the restrictions outlined above still apply to a buy-to-let mortgage on a flat, but most lenders are open to the possibility for those that are eligible. There are additional conditions too though, such as EPC rating requirements (energy performance certificate), and loan-to-value ratios offered are generally lower across the board.

Get matched with a mortgage broker who specialises in flats

The independent brokers we work with are specialists in their fields, so when it comes to understanding how the landscape works around mortgaging a flat, they know where to go and how to do it. They also know which issues will need to be solved and how to transform applications into strong contenders, and ultimately negotiate on behalf of their clients to ensure the very best deals are obtained.

We carefully match you to the right person for you and demand that all of the brokers we work with are fully trained and five-star rated. Contact us today on 0808 189 2301 or make an enquiry online for an initial free consultation.

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FAQs

If you allow tenants to move into your home (and don’t own it outright) and charge them rent, you will be breaking the terms of your loan if you haven’t switched to a buy-to-let mortgage, which could have serious implications.

Your lender could demand you to pay the whole mortgage in full. If you find yourself needing to rent out your home as an ‘accidental landlord’ (if your circumstances have unexpectedly changed), you can apply to your lender for a ‘consent to let’ agreement, which will give you permission to rent your flat out for a restricted time frame.

You will need to clear affordability and eligibility checks, but subject to your property falling in line with a valuer’s report and satisfying lenders of mortgageability, 95% mortgages are available on flats and a good number of lenders will consider them too.

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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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