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Mortgage Advisor & Director
Can I get a mortgage for a flat above a shop?
The simple answer is yes, although it is slightly more complicated than for a standard property.
Some lenders can be unwilling to lend on flats above shops, due to the additional risk and complexity associated with being above a commercial property. However, the good news is that as a whole-of-market broker, Teito has access to mortgage deals with lenders who are willing to lend on this basis.
Why are flats above shops seen as a higher risk?
These properties are likely to lose value faster in comparison to standard properties in certain market conditions.
Lenders will look to you to offset some of this risk, perhaps by requiring a larger deposit or increasing the mortgage rate accordingly. Commercial properties are more likely to create annoyances such as late-night noise and parking difficulties. Depending upon the nature of the business, there may also be additional issues such as antisocial behaviour and fire risk; which can put lenders off. If you've made up your mind on flat above a commercial property, our advisors can help you to find a deal through a specialist lender.
How much can I borrow?
Each lender has its own cap on borrowing, typically ranging from 4 times to 5 times your income, although some can lend up to 6 times your income in specific scenarios. Lenders will decide which pay they will accept; for example, some will not allow commission or bonuses into the calculation; some will not recognise revenue from certain benefits.
How much deposit will I need?
Your lender will demand a higher deposit on property above commercial premises than a standard property, to offset some of the risks.
This will vary on the type of business being conducted. For example, if you are looking to buy a flat above a shop, you are likely to require a 15% deposit (85% Loan to Value Ration) compared to a 25% deposit above a restaurant, increasing to 40% above a takeaway. The different categories of commercial properties are listed below, with A1 being the lowest risk and A5 being seen as higher risk, you will need to let your lender know into which category the property falls.
Categories of commercial property
- Category A1: Shops Includes, shops, repair or service shops, dry-cleaners, post-offices, travel agencies, sale of cold good, hairdressing,
- Category A2: Financial and professional services Includes banks, estate agents, betting shops, legal services.
- Category A3: Restaurants and cafes. Includes restaurants, snack bars, cafes, sale of hot food
- Category A4: Drinking establishments Pubs and bars.
- Category A5: Hot food takeaways Where the consumption of hot food off-premises.
What if I have bad credit?
It is not impossible to get a mortgage with bad credit; you can read our guide to bad credit mortgages to learn more.
By considering a flat above a commercial entity, you have already limited the pool of available lenders, and having bad credit will make the process more difficult. The nature of the adverse credit will affect the chances; if you have any questions, our advisors can help!
Can I get a flat above a shop as a buy to let property?
Flats in these areas can be popular with renters, and there are mortgage providers who will lend on these properties. The typical requirements of a Buy to Let mortgage will apply in the same way, read our guide to learn more. If you are ready to start the process, complete our online form.
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Can I get a flat above a shop as a retirement property?
The available pool of lenders for people looking to buy a flat above a shop as a retirement property is limited.
That being said, if you have sufficient pension, our advisors may be able to find you a mortgage with a specialist lender. Another option may be to consider a Retirement Interest Only mortgage; again our advisors can help you with this.
What if I want to buy a shop with a flat above?
It is possible to get a semi-commercial or mixed-use loan to facilitate buying a shop and flat together.
Our advisors can help understand your situation and start the process of applying with a specialist lender in this scenario.
How can I learn more?
As a whole-of-market mortgage broker, at Teito, we have relationships with specialist lenders.
Our experienced advisors have helped people to get a mortgage in all situations, complete our quick and easy online form to get the process started today.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
Last updated 29 February 2024