Mortgage Broker Q&A – Mortgages for Flat’s above shops and commercial property

Question : I am looking to buy a flat above a shop or other commercial premises and have been told this can be difficult, what do I need to be aware of?

Answer: Lenders always have to be aware of risks that may affect the value of a property and saleability should the loan go into default. A flat above a shop or commercial premises has several risks which a lender will consider when deciding whether to lend.

These will include the nature of the business which the flat is above; if it is something which would cause little disturbance to the owners of the flat such as a florists or estate agents it is less of a risk. However if it were a fish and chip shop for example where late opening hours and food smells may affect the ability of the lender to re-sell the property then it is likely that it may be difficult to arrange a mortgage.

Consideration will also be given to the area in which the flat is located. A flat over commercial premises in an area like Chelsea or Knightsbridge would still command a significant value and appetite for lending. However the same property in an unfashionable part of a city like Manchester or Liverpool may be much more difficult to arrange a mortgage on.

Another important factor would be the access to the property, if it has a connected access to the commercial premises then insurance would be very difficult to arrange separately and this would also restrict lending.

You should be aware as a potential purchaser of such a property of these same risks as properties which are difficult to mortgage may in turn be difficult to sell. For further information and advice on flats over commercial property call one of our mortgage advisors on 08454594490 for independent mortgage advice.

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