Can I get a mortgage on a flat above a shop or pub?
Getting a mortgage on a flat above or near a commercial property can be tricky. There are a few things that you should know, to understand the likelihood of getting an approval from a mortgage lender.
Many Mainstream mortgage lenders consider buying a flat above or near a commercial property riskier. This is because commercial properties can potentially disrupt the residential property. This could be due to opening hours, noise and smell, for example, a food shop or takeaway.
Some lenders won’t even consider an application for a mortgage above or next to a commercial property, while some will accept applications and make their decision on a case-by-case basis. The decision will ultimately come down to valuer comments when a qualified valuer inspects the property and reports back to the mortgage lender.
Examples of commercial units which are usually relatively easy to get a mortgage near include:
- Retail units which don’t open early/late
- Professional services such as doctors, dentists, lawyers, accountants, banks
On the other hand, the following types of commercial operations are likely to be more challenging to get a mortgage near:
- Pubs, bars & nightclubs
- Restaurants & take-aways
- Laundrettes & dry cleaners
- Hairdressers & beauty salons
The overall quality of the building and common areas can have a big impact on whether a lender will be keen on a property, so it’s worth bearing this in mind.
You may also find you have to put down a larger deposit. With mortgages on standard properties, it may be possible to borrow up to 95% loan to value with some mortgage lenders, which means having a deposit of just 5%. But if you’re buying a property above or next to commercial premises, you may have to put down a larger deposit.
Why do mortgage lenders consider this type of mortgage application riskier?
It all comes down to future saleability of the property. Before lenders make any lending decisions, they want to be assured that the property will be sellable in the future in case they have to repossess it down the line and recoup their costs.
Homes above or near commercial properties tend to be trickier to resell. Demand is typically lower because of concerns related to the use of the commercial property, for example litter, noise, smells from cooking and anti-social behaviour, all of which could deter potential buyers.
You should think carefully about buying a property above commercial premises for the same reasons, you might find it’s not much fun living there and you might find it harder to sell.
What can be a positive is location, and this could make a difference to lenders too. If the property is in a busy city centre where there’s high demand, saleability may be greater than if the property were in a more rural location. This could mean mortgage lenders are less cautious.
A good mortgage broker will review the property and scour the whole mortgage market to see what options are available to you.
Undray Griffith – 24th July 2023