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Mortgages For Flats Above Shops

Mortgages For Flats Above Shops

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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.

Specialist lenders are working with Revolution Finance Brokers who are happy to offer mortgage terms on the residential proportion of a dual-purpose property. 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 retail shop?

While this type of mortgage 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.

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

The following topics are covered below:

Why are some mortgage lenders unable to lend against a dual-use property?

What other factors impact mortgages for semi-residential properties?

How can I get a mortgage for a flat above a restaurant?

What deposit do I need for a residential property above a business?

Why are some mortgage lenders unable to lend against a dual-use property?

Mainstream mortgage providers consider this type of mixed-use property riskier for many reasons.

Part of this is that commercial properties can potentially disrupt the residential property above. This 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. Mortgage lenders often consider applications from the perspective of their investment. They may require a higher deposit or not be willing to consider mortgaging this type of property.

What other factors impact mortgages for semi-residential properties?

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 factors 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, which includes food retailers, licensed premises, restaurants and cafes.

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

How can I get a mortgage for a flat above a 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.

What deposit do I need for a residential property above a business?

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 value of the property. 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

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Frequently Asked Questions

Who can secure a mortgage for a flat above a shop?

When working with any lender, you will need to demonstrate the affordability of the loan and fall within the lenders' criteria for acceptable risk.

What size mortgage is available for a flat above a shop?

Different lenders set different rates, but on average, you can obtain a mortgage for around four times your annual income. Other lenders will mortgage up to five or six times your annual income, depending on the circumstances.

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
How big a mortgage can I get if I have bad credit?

Some lenders will not consider offering a mortgage to an applicant with bad credit, and others specialise in this area and helping applicants to invest in a property, even if they have been bankrupt before.

If you have struggled with credit issues, give Revolution Brokers a call on 0330 304 3040, and we will help you identify the most suitable mortgage options for your circumstances and lending requirements.

Is there a maximum age at which I can mortgage a flat above a business?

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.

Are buy-to-let mortgages available on flats above retail shops?

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.

Buy-to-let mortgages are available through mainstream lenders as well as specialist mortgage providers and tend to command higher deposits than residential properties.

Your mortgage lender will need to understand the anticipated rental income per annum to be able to verify that you can afford the mortgage repayments. If you are looking for a buy-to-let mortgage with the most advantageous terms and rates, drop us a line at info@revolutionbrokers.co.uk, and we will help you find the best deal!

Do lenders offer mortgages for flats above supermarkets?

While less common, yes you can certainly secure a mortgage for a flat above a supermarket. This is very similar to mortgaging a flat above other retail premises, so a specialist mortgage lender is far more likely to be able to help.

Can I mortgage dual-purpose premises for my shop and flat?

You certainly can! These options are called mortgages for mixed-use, or semi-commercial loans, and mean that you have a semi-commercial mortgage for both the business downstairs and your living premises upstairs.

This is a specialist mortgage, so give us a call to understand the pros and cons.

How do I find a mortgage lender for a flat above a shop?

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

You can mortgage a flat above a shop to live in, as an investment, as a buy-to-let, or as existing premises above your own business.

Each lender has their 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 is classed as commercial premises?

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

Mortgage lenders consider the categories of business to determine which they will and will not lend against. The most common classes used 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 underneath the flat you wish to mortgage falls. This will help your lender decide whether it is something they can lend against.

If you are unsure as to 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, so if you wish to purchase a property that isn't covered by the mainstream lenders, we are here to help.

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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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