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Flat above shop mortgage

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

Flat above a shop mortgage

This article is about helping customers understand the requirements for getting a flat above shop mortgage. If you’re not interested in buying a flat above a commercial property, see our article on mortgages for flats.

Getting a flat above shop mortgage or any commercial premises can be challenging. Finding a mortgage lender who will accept your request may be difficult if you are in this situation.

Some mortgage lenders will offer mortgages for flats over shops if you have the right circumstances.

Talk to a mortgage broker to access the entire market to find the mortgage deal that suits your needs.

Click the link below to speak with a mortgage lender. We have a few mortgage providers lending mortgages for commercial property.

We can discuss your mortgage application and mortgage repayments and introduce you to a mortgage lender who suits your needs.

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Can you get a mortgage for a flat that is above a shop?

You can take out mortgages for flats above commercial premises on either a residential or purchase-to-let (BTL) basis. It is more difficult to find a mortgage lender because of this type of property’s extra risk and complexity.

Is it hard to get a mortgage on a flat above a store?

For several reasons, lenders consider flats above shops or other commercial premises riskier than a residential mortgage.

The most important reason is that commercial properties can be a nuisance, such as noise, smells, or unsociable hours. This could impact their resale values.

Statistics show that these properties lose value more quickly under certain market conditions. Sometimes, lenders will want to protect their investments by asking for higher deposits or refusing to touch them.

What other factors could influence the lending decisions of mortgage providers?

Lenders will be more likely to accept an offer based on the business category or the layout of the commercial premises. These factors can also impact the property’s fabric and desirability. For example, if an entrance shares a staircase with the business area, it could be used heavily and poorly maintained.

Parts of the flat may also overhang the shop, at which point the buyer might need a flying freehold mortgage.

Lenders are most concerned about business categories A3-A5, which include restaurants, take-outs and licensed premises. These can be problematic because they attract antisocial elements such as noise, smells and alcohol-related issues. They can also have a high fire risk. This can impact resale. It can be challenging to get a flat above a bar or restaurant.

Is it possible to get a mortgage on a flat above a restaurant?

What can you do if your dream home is located above any of these problematic business categories?

Some lenders specialise in lending to flats above restaurants, drinking establishments, and take-out outlets. A few high-street lenders will also consider this option on a case-by-case basis. If the circumstances are right, you may even be able to get a mortgage for a flat above a chip shop!

These types are not easy to lend on by most lenders. This means a smaller market and fewer deals and providers available. Rates will likely be higher than the average.

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What deposit is required to get a mortgage for a flat above a commercial building?

Lenders will require more outstanding deposits for flats above shops than for more traditional homes. They may also ask for a higher deposit for flats above bars, restaurants, pubs or bars. Apartments above takeaways tend to have the most increased deposits because of these businesses’ long hours.

The average Loan to Value (LTV) for flats above shops is between 85% and 90%.

Can I get a mortgage for a flat above my shop?

You must convince your lender that you can afford the mortgage repayments and that your overall risk profile is compatible with their policies.

These are the most important things to remember when applying for mortgages on flats above commercial property.

How big a mortgage can I get for a flat above my shop?

Lenders have their limits on income multiples. However, most will lend 4x your income, while a few may go up to 5 or 6x.

There are also different policies regarding what types of income they accept (e.g. They also have other policies regarding what income types are received (e.g., salary, fixed term contracts and self-employed), as well as how long you will need to be in your current job.

Can I get a flat over a shop if I have bad credit?

Lenders have different opinions about what they will accept for adverse credit. Some are strict and require clean credit records, while others will accept applicants with severe issues like bankruptcy.

If you have credit problems, obtaining a mortgage to buy a flat above a shop may be more challenging. However, it is worth talking to one of our advisors. They can help you assess your chances of being approved for a mortgage.

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What is the best way to get a flat over a shop?

Most lenders that mortgage flats above shops won’t lend to retiree borrowers on a regular residential mortgage basis. However, a few will consider this if they have proof of sufficient pension income. A couple also offers Retirement Income Only (RIO) mortgages, so this might be an option for you if you want to purchase this type of property later in life.

Can I get a Buy to Let mortgage for a flat that is above a shop?

These flats are often located in central areas and are very popular with renters. If you meet the lender criteria, it is possible to obtain a mortgage to purchase a flat above a restaurant, shop or other commercial property.

Specialists and high-street lenders can offer these products. They are subject to the same restrictions as any other BTL mortgage. This means they will have higher interest rates and will need more extensive deposits. These factors are likely compounded with the stricter criteria for this property type.

Most BTL providers will base their lending decisions on viability and investment, whether the rental income forecast is enough to pay the mortgage.

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Can I get a mortgage to finance a flat if I shop at a supermarket?

As long as you satisfy the eligibility requirements of the lender, yes. Specialist providers that offer mortgages for flats over shops will not treat your application differently if the supermarket the property is located above is a supermarket.

How to get a mortgage for your shop or flat

Can you get a single mortgage for the shop and the self-contained flat if the commercial premises under the flat you want are your own?

Many factors will affect the answer. However, it might be possible to mortgage both properties using a semi-commercial or mixed-use loan.

Flats above shops: Mortgage lenders

Although it is a small market, several specialist mortgage lenders offer mortgage products to those who want to purchase flats above commercial properties. You should be able to find one willing and able to make an offer in almost any situation.

Remember that lenders have rules about what flats are acceptable above shops. Some will allow a flat above a commercial building, while others will only accept one storey above the apartment you want to purchase. While some lenders place importance on the desirableness of the neighbourhood, others don’t.

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What counts as commercial premises for lenders?

Any property that is used for commercial purposes, and has public access, can be called a commercial premises. This includes shops, restaurants, bars and supermarkets, take-out outlets, banks, and pubs.

Each type of commercial premises is classified into a different category. This allows council planning departments to identify the agreed use of the property. These are:

  • Category A1Includes general shops such as food shops or newsagents
  • Category A2
    Professional services such as banks and estate agents are covered
  • Category A3
    Restaurants, cafes and food-and-drink establishments
  • Category A4
    Bars, pubs and other drinking establishments
  • Category A5
    Take-out hot food outlets

Lenders must know the category of the business to make an informed decision about whether to lend or not. They also need to know the rates and deals they offer.

Talk to an expert about mortgages for flats and commercial properties today!

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