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Mortgages For Flats Above Shops

Most lenders consider a flat above a shop a semi-commercial – so understanding what that means and how it works is crucial to ensure you apply for the right mortgage through the best lenders!

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-15
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Can You Take A Mortgage For a Flat Above Shops?

Many apartments or flats are based above retail or commercial premises, and it can be more challenging to obtain a competitive mortgage for this type of property.

As specialist lenders are working with business loan broker who are happy to offer mortgage terms on the residential proportion of a dual-purpose property - but many mainstream banks or lenders won't help with a mortgage for a flat above a shop.

If you are looking to purchase a flat above commercial premises, give us a call, and we will help you identify the right lenders and the best deals available on the market.

Can I Get a Mortgage for a Flat Above a Shop?

Getting a mortgage on a flat above a shop in London is common - but this type of loan is less widely available through mainstream lenders.

It is possible to secure a mortgage either for a residential purchase or as a buy-to-let investor - it's all about knowing which providers offer mortgages suitable for buying a flat above a shop.

The reason this is more complex is that many lenders consider a dual-purpose property a higher risk.

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Why Are Some Mortgage Lenders Unable to Help With Buying a Flat Above a Shop in London?

Mainstream mortgage providers consider buying a flat above a shop riskier than a conventional standalone residence for many reasons.

Part of this is that commercial properties can potentially disrupt the residential property above.

That could be due to working unusual hours, generating noise or producing smells - for example, a food shop or takeaway.

The values of flats above commercial premises tend to be less stable in terms of market value. Therefore, the lender has less certainty that the property will retain value or appreciate as you make regular mortgage repayments.

Mortgage lenders always consider applications from the perspective of their investment, so they will usually take steps to mitigate their exposure or the potential for the property to be worth less than the outstanding debt.

They may require a higher deposit or not be willing to consider mortgaging this type of property - other lenders will charge higher arrangement fees or interest costs.

What Other Factors Impact Getting a Mortgage on a Flat Above a Shop?

If you're interested in buying a flat above a shop, your mortgage lender may need to know the type of business and how the property is laid out before they can consider making an offer.

These aspects affect the value of the property and the security of the premises - for example, if the main entrance is shared.

The most challenging type of property to secure a mortgage against is a business within categories A3 to A5, including food retailers, licensed premises, restaurants and cafes.

It is more difficult to mortgage this type of flat because those business categories are more likely to carry risks of noise nuisance, making it harder to sell the property eventually.

Before getting a mortgage on a flat above a shop, you should evaluate which lenders are most likely to approve your application, especially if the business downstairs sells food, opens at night, or is a takeaway operation.

Retail premises such as a clothes shop or an office are much easier prospects, and you'll normally find it more straightforward if you're getting a mortgage on a flat above a shop that is considered low risk.

How Can I Get a Mortgage for a Flat Above a Shop or Restaurant?

While it may be more challenging to secure competitive lending from a mainstream mortgage provider, Revolution Brokers are here to help!

We work with a network of reputable lenders who specialise in lending against properties above businesses such as bars, takeaways and restaurants.

These types of flats are often a lucrative investment, with a lower value and ideally placed close to places of work and business.

How Do I Find a Mortgage Lender to Help With Buying a Flat Above a Shop?

Residential properties over businesses are less common than residential mortgages, yet several niche mortgage lenders specialise in this property type.

You can get a mortgage for a flat above a shop to live in or as a buy-to-let investment. You can also purchase existing premises above your own business with a mortgage suited to buying a flat above a shop.

Each lender has its criteria, so it is essential to understand what those are and how they will apply to your circumstances before spending time on applications with lenders who will not be able to offer you lending.

Revolution Brokers are expert mortgage advisors with access across the spectrum of mainstream and niche lenders.

We work with clients, large and small, commercial and private, to identify the most competitive mortgage offers for your specific requirements.

What Deposit Do I Need for Buying a Flat Above a Shop?

Most lenders will ask for a larger deposit, and for mortgage providers who do not specialise in this property sector, this could be of a prohibitive value.

The average Loan to Value (LTV) rate is capped at 85%. LTV means the amount of mortgage lending you can borrow against the property's value.

Standard residential properties may have mortgage options available at 90% or even 100% of the property value, allowing buyers to purchase with a deposit from 0-10%.

Your typical LTV is likely to be:

  • Capped at 85% for a flat above a shop - 15% deposit required
  • Capped at 75% for a flat above a restaurant - 25% deposit required
  • Capped at 60% for a flat above a takeaway - 40% deposit required

What is Classed as Commercial Premises if I Am Getting a Mortgage on a Flat Above a Shop?

A commercial premise is a property that carries out business and is accessible to the public. This classification covers all types of business, from pubs and cafes to shops and banks.

Mortgage lenders consider the business categories to determine which they will and will not lend against. The most common classes used in buying a flat above a shop are:

  • A1 - general shops such as newsagents
  • A2 - professional services such as estate agents
  • A3 - food and drink establishments such as restaurants
  • A4 - drinking establishments, including pubs and bars
  • A5 - food takeaways and retailers

You will need to know which category the business falls into before you start the application process for getting a mortgage on a flat above a shop.

This information will help your lender decide whether it is something they can lend against, and whether the mortgage for a flat above a shop fits their lending criteria.

If you are unsure which category applies, whether you can get a mortgage for your flat, or which option is best for you, give us a ring on 0330 304 3040.

Revolution Brokers have years of experience in securing niche mortgages for our clients, including those buying a flat above a shop, and we are here to help.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Frequently Asked

When working with any lender, if you're buying a flat above a shop you will need to demonstrate the affordability of the loan and fall within the lenders' criteria for acceptable risk.

Theoretically, any applicant who wants a mortgage for buying a flat above a shop can apply - although lender policies may vary.

For example, suppose you're interested in buying a flat above a shop as a rental asset.

A semi-commercial lender might require you to have previous experience in managing a business or provide a business plan showing how you intend to manage the mortgage repayments.

Different lenders set different rates, but on average, you can obtain a mortgage for around four times your annual income if you are buying a flat above a shop.

This calculation depends on the lender's policies and affordability assessment - they might also calculate a maximum mortgage depending on the value of the property and the forecast rental income if it is an investment asset.

Depending on the circumstances, other lenders will mortgage up to five or six times your annual income to help with buying a flat above a shop.

The policies in place will determine what types of income are considered and can include:

  • Employment salaries
  • Self-employed revenue
  • Benefits income
  • Fixed-term contract revenue
  • How long you have been in your job

Bad credit can make getting a mortgage on a flat above a shop tricky.

Niche lenders specialise in this area and help applicants invest in a property, even if they have been bankrupt before.

If you have struggled with credit issues, and need help getting a mortgage on a flat above a shop give Revolution Brokers a call, and we will help you identify the most suitable mortgage options for your circumstances.

Many lenders will not extend a mortgage offer to a retired applicant, although specialist lenders will offer to lend based on pension income and other revenue streams.

There are also products called Retirement Interest Only (RIO) mortgages, which can help you purchase a property later in life.

If you are retired, or nearing retirement, and would like to take out a mortgage, give our friendly team a call and we will have a chat to explain the options you can choose from.

Yes, buy-to-let mortgages are available; this type of property tends to be in town or city centres and are popular rental properties being conveniently located for workers and students alike.

A buy-to-let mortgage for buying a flat above a shop is available through mainstream lenders as well as specialist mortgage providers. This type of mortgage tends to command higher deposits than residential properties.

Your mortgage lender will need to understand the anticipated rental income per annum to verify that you can afford the mortgage repayments.

While less common, you can certainly secure a mortgage for a flat above a supermarket.

The process is very similar to getting a mortgage on a flat above a shop, so a specialist mortgage lender is far more likely to be able to help.

You certainly can! These options are called mortgages for mixed-use or semi-commercial loans. A mixed-use mortgage can include buying a flat above a shop, and the business below.

In normal blocks of flats, a leaseholder can sometimes negotiate with the owner to buy out the freehold rights - which means they own a proportion of the land and the building.

That isn't common for a flat above a shop, but you would be the freehold owner if you bought an entire building and let out the lower proportion to a business.

No, residential mortgages are solely designed for living accommodation, so you would not be able to apply for a regular mortgage to purchase a commercial building.

If you want a mortgage for a flat above a shop, and to buy the shop as well, you need a mixed-use or semi-commercial mortgage.

It can be - a lot depends on the shop underneath. Catering businesses, late-night shops, or takeaways can cause noise and smell disturbances, impacting your flat's market value and saleability.

The leasehold period will also dictate the ease of the sale because a shorter lease is less attractive.

If you're getting a mortgage on a flat above a shop it'll normally be a leasehold property - where buying a flat above a shop includes the right to live in the property (for up to 125 years normally).

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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