Can I mortgage an apartment above a shop?

One way first-time buyers can secure a property is to buy an apartment above a shop.

It might not be for everyone. But, according to the Royal Institute of Chartered Surveyors, living above commercial property can be ‘a good idea’.

Most apartments sit above shops. That’s because when they purposely built or started life as residential properties. They were built for the shop owner to live above the premises. As shopping habits and lifestyles have changed, more of these apartments have become empty. That’s often because the owner bought a bigger premises elsewhere. Often, the higher floors were used for staff areas or stockrooms.

Either way, an apartment above a shop could offer first-time buyers a chance to secure their first property.

Can I mortgage an apartment above a shop?

There are pros and cons to buying a flat above commercial premises. We’ll have a quick look at those later. But the first question asked is how difficult is it to get a mortgage for a flat above a shop?

Not all lenders approve home loans for apartments above commercial premises. But there are specialist providers who will offer mortgages on such properties.

The reason that many lenders are nervous about mortgaging an apartment above commercial premises is the resale value. That’s often because of problems with the hours the shop is open as well as noise and smells. There’s also an increased risk of fire if the commercial property below businesses such as restaurants.

Apartments above flats are also leasehold. That means you don’t own the building, just your flat. Most apartments are leasehold but those above commercial properties often have specific terms. That usually means the leasehold fee is usually higher. As a result, this can impact affordability.

Your legal fees might be higher because of the extra time it will take for solicitors to check out the lease.

Using a mortgage broker is advisable if you’re considering buying a flat above a shop. That’s because they can access deals that are not available from high street lenders. Also, they will have knowledge of the specialist lenders. We’re a broker, so if you want more advice, contact our team today.

Finding a mortgage

Other than the points we’ve already made, the rest of the mortgage process is similar to any other home loan. For example, you will need to have a credit history check to ensure you can afford monthly repayments and interest payments.

If you’re a first-time buyer, here’s all you need to know about buying your first property.

Pros and cons of flats above commercial premises

Pros

Before deciding if a flat above a commercial premises is right for you, here are a few points to consider.

Cheaper than other apartments. There is a reason why this type of property is cheaper than standard flats. Some people don’t like the idea of living above a property that might be open to the public at unsociable hours. And that makes them less attractive, so cheaper. Of course, some shops and offices close at 5pm and aren’t open over weekends. It could make such an apartment very attractive. You might bag a bargain!

Bigger rooms. As many of the traditional properties with commercial ground floors were built a long time ago, they often have bigger rooms. The footprint is often larger because the shop requires more floorspace. All this means you could get a bigger place than a standard flat.

Affordability. Because this type of apartment is more affordable, you might be able to live in an area that would have been out of your price range if you bought a standard property.

Location. As most commercial properties are in busy areas, you’re likely to be in a location where there’s lots going on. That means you are more likely to have access to better transport links. Also, you’re likely to be within walking distance of restaurants and other leisure facilities.

Cons

Whilst there are a lot of reasons to buy a property above a business, there are also drawbacks. So, you need to consider these before buying or applying for a mortgage.

Noise. As you’re likely to be in a busy location, you will have more noise around you. Also, consider the business below. If it’s busy out of normal trading hours or it’s a bar or restaurant, it will be noisier than a residential-only area.

Access. While it’s unlikely you’ll share a door with the business below, some properties only offer access through the business. Your own door might be in a dark alley or in a yard to the rear. Also, parking could be difficult. If you’re fortunate, there may be a yard you can use. But you’re more likely to need to park in the busy street. Check that out before you consider making an offer.

Smells and pests. If the property below is a restaurant or a bar, there’s a chance you’ll have smells wafting into your flat. Also, there’s a chance there will be more pests because of the food waste.

Future use. You may be lucky to find a flat above an office that closes at 5pm or even earlier on a Friday. And that could mean you also live in peace at the weekend. But what if it becomes empty and then changes to become a convenience store that closes late? Be prepared for that possibility! Commercial property transactions have remained high since the pandemic, so it is possible it will house a different type of business in the future.

Fire hazards. If the business is or does become a restaurant, it increases the chance of fire. We’re not saying there will be one, but the chances are higher due to the nature of the business below.

What should I do next?

If you have seen a property above a shop and want to know about securing a mortgage, you can speak to our experienced advisers today. Contact us now for a no obligation appointment.