Getting a mortgage on a flat above a shop
Are you interested in getting a mortgage above a shop or a commercial space? This article will help you understand the process of applying for a mortgage above a shop and what to look out for when doing so.
For the last decade, we are getting many queries regarding mortgages for flats above a shop. With this article, we will try to update our readers with all the necessary details for this type of mortgage on commercial premises. Getting a mortgage on a property or flat above a shop or commercial premises is possible but complicated. A flat above commercial premises could be a good investment opportunity for many people. These commercial properties could be pubs, restaurants, takeaways etc. There are many different categories of commercial property as assigned by the council. Fortunately, there are some mortgage lenders who can offer you such mortgages under the right circumstances.
How We Work
1: We contact you and take down your details, income outgoings, name, address etc.
2: We will research the whole market and email you a detailed quote as well as a list of documents to proceed.
3: You upload the documents and information needed via our channel our online portal.
What is a Shop Mortgage?
A shop mortgage is a type of mortgage that allows you to borrow money against your property, which can be used to buy a business or commercial property. The loan is secured by the building itself, meaning it’s not just a personal loan. You need to have an existing business before you apply for a shop mortgage. If you don’t own any businesses yet, then you should consider starting one first.
Shop Mortgages: What You Need To Know
The following information will help you get started with your application for a shop mortgage.
1. Income
You must show proof of your monthly income from your current job. It can be either salary slips or bank statementsA record of a borrower's financial transactions often requir.... In case you are self-employed, you must provide proof of your monthly net profit.
2. Proof Of Assets
You must also prove that you have enough cash to cover the amount you want to borrow. You can do this by providing copies of your latest tax returns. Also, if you have any other assets like cars, houses, land, shares, etc., they must be shown to the lender.
3. Credit Score
Your credit score plays a very important role while applying for a mortgage. The higher your credit score, the better chance you have of getting approved for a loan. However, even if your credit file score is low, you may still be able to get a mortgage, provided you meet certain requirements. You can check your credit file on our website.
4. Employment History
If you have been employed for at least two years, you can expect to receive a lower rate of interest than someone without work experience.
5. Rental History
Your landlord must give his consent for you to get a shop mortgage. He might ask for a security deposit, which he would return once you pay off the loan.
6. Your plans for the future
You must explain how you plan to use the money you borrow. Will you invest it in another property? Or will you use it to start up a new business?
7. Your financial situation
You must show that you have enough savings to repay the loan. You can do this through your bank account statement or by showing a copy of your latest tax return.
8. Your occupation
You must tell the lender about your profession and what kind of business you intend to run. This helps them understand whether you can afford to make regular payments.
9. Your previous loans
Lenders usually look into your past record when deciding whether to approve your application or not. They check your credit report to see if you have had any bad debts or missed payments in the past.
10. Any special needs
Lenders are more likely to approve your application if you have children or dependents. They also prefer applicants who have a steady source of income.
11. Your age
Age does matter when it comes to getting a mortgage. You must be at least 18 years old to qualify for a shop mortgage. Lenders tend to offer older borrowers lower rates of interest.
12. Your marital status
Married people often find it easier to get a mortgage because their partner can co-sign on the loan. Single people can still apply for a mortgage, but they will have to put up additional collateral.
Can you get a mortgage on a flat above a shop?
Yes, it’s possible to get a mortgage on a flat above a commercial property in the UK. It could be residential or buy-to-let properties. The main thing that matters here is the location of the property and the area where the building stands. If your property is located near a busy road then it would not be wise to invest in it. Moreover, if the building has been declared unsafe by the council then it might affect your chances of getting a loan.
The most important factor which determines whether you can get a mortgage on property above a shop is the value of the property. You need to have a clear idea about what the property is worth. This information should be provided by a professional valuer. In addition to that, you also need to check how much rent the property generates.
You must ensure that the property is freehold. If it is a leasehold then you cannot get a mortgage on it. You may also want to consider the size of the property. If the property is too small then it will not generate enough income to repay your loan. On the other hand, if the property is too big then it will increase the overall cost of the mortgage.
You must also make sure that the property complies with the planning permissionPermission granted by the local authority for a property to .... If it does not comply with the planning permission then you cannot get a loan from any lender. You may also want the property to be compliant with fire regulations.
If you own the property then you can apply for a mortgage on it yourself. However, if you do not own the property then you will need to apply for an equityThe difference between the value of the property and the amo... release mortgage. An equity release mortgage is a form of home improvement loan which allows you to borrow against the equity in your house. Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.
Why is it difficult to get a mortgage for a flat above a shop?
A mortgage application for a flat over a shop could be difficult to get approval because mortgage lenders consider it a riskier investment when compared to regular residential properties. The most important reason is that property over a shop could create nuisance such as noise, smells, late-night shouting etc which could affect the resale value. It is a fact that these types of properties lose value faster as compared to other types, so lenders will always try to protect their investment by asking for larger deposit amounts.
In order to avoid the hassle of applying for a mortgage on property above a shop, you may want to consider buying a normal residential property instead. This way, you will have more options available to you. You can sell the property at a later stage and use the money you earn from this sale to pay off your mortgage.
Another option is to ask your bank for a personal loan. Banks are willing to lend up to 80% of the total value of the property. Therefore, you can easily get a personal loan for around £10,000 to £15,000.
There are some disadvantages associated with getting a mortgage on a property over a shop. One disadvantage is that you will not be able to take out a mortgage for more than 75% of the market value of the property. Another disadvantage is that you will have to pay stamp dutyA tax paid by the buyer when purchasing a property. on the purchase price of the property.
The main advantage of getting a mortgage for a flat over a store is that you will have no problem selling the property at a later date. This means that you can save a lot of time and effort.
If you are struggling to get a mortgage on such flats, you can contact a market broker who can help you in getting a suitable mortgage deal.
What else could impact the mortgage provider’s lending decision?
The following factors could influence the mortgage provider’s decision:
• The amount of rent you receive from the property.
• Whether or not the landlord has agreed to extend the lease.
• What type of tenancy agreement exists between the tenant and the landlord.
• The number of years left on the current lease.
• Any outstanding debts owed to the landlord.
• Any recent changes to the building structure (e.g., extensions) or improvements made to the property.
• The size of the property itself.
• The location of the property.
• How much the property is worth.
• Any legal issues surrounding the property.
• Your credit history.
• Any previous applications for mortgages.
• Any previous defaultsMissed payments on credit accounts, which can affect a borro... on loans.
• Whether or how long you intend to stay in the property.
• Type of property.
Can you get a mortgage for a flat above a restaurant?
Getting a mortgage for a flat above a restaurant is similar to any other shop. Banks and building societies will do the same affordability check as others. Some mortgage lenders will resist giving you a mortgage for flats above drinking establishments, takeaway outlets etc because of the higher risk of fights or other crimes. You can contact a specialist mortgage broker for financial advice otherwise it would be a difficult task for you.
How much deposit will I need for a mortgage on a flat above a commercial premise or a chip shop?
In general, banks and building societies require 5-6% of the total cost of the property as a deposit. However, if you are looking for a cheaper alternative, then you should look into secured loans which require only 3-4% of the total cost.
How We Work
1: We contact you and take down your details, income outgoings, name, address etc.
2: We will research the whole market and email you a detailed quote as well as a list of documents to proceed.
3: You upload the documents and information needed via our channel our online portal.
FAQs- Mortgage for Flat Above
Can you get a mortgage on a flat above a shop?
Yes! If you want to buy a house, you can apply for a mortgage for a flat upstairs. It is important to note that the lender may request additional documents depending upon the nature of the premises.
What is the difference between a first and second charge mortgage?
A first charge mortgage is when the borrower pays off part of the loan before they make their final payment to the bank. A second charge mortgage is where the borrower makes one lump sum payment towards the full amount of the loan.
Why is it difficult to get a mortgage for a flat above a shop?
Banks and building societies are reluctant to lend money for properties located above shops due to the high level of crime associated with these areas. They also fear that there will be problems with collecting rents from the tenants.
What is a floating rate mortgage?
A floating rate mortgage allows the interest rates to vary within a specified range during the life of the loan. This means that the monthly repayments remain fixed but the overall cost of the loan rises or falls according to the prevailing interest rates at the time.
Can you get a mortgage for a flat above a restaurant?
Yes! There are many different types of restaurant and each type has its own set of rules regarding whether or not you can get a mortgage for the property above them. Most building societies will allow you to get a mortgage for flats above restaurants provided that the area is safe and secure.
How much deposit does a bank ask for a mortgage for a property over a shop?
The usual requirement is around 5-10%. The exact figure depends on your circumstances and what sort of property you have bought.
What is a variable rate mortgage?
A variable-rate mortgage allows the interest rate to change throughout the term of the loan. This usually happens once every six months. The interest rate changes based on market conditions such as inflation and the Bank of England base rateThe interest rate set by the Bank of England, affects the in....
What is an affordable mortgage?
An affordable mortgage is one that is suitable for people who earn less than £20,000 per year. These mortgages tend to offer lower interest rates and longer repayment periods.
Do I need a guarantor for a mortgage for a shop?
No. Banks and building societies do not normally require a guarantorA person who guarantees to repay a mortgage if the borrower ... for the property above a shop. In fact, some lenders even waive this requirement.
How much deposit will I need for a mortgage on a flat above a commercial premise?
Deposit requirements depend on the type of business you are buying. Some businesses like pubs and hairdressers require no deposit while others like supermarkets and car dealerships require large deposits. You can contact a specialist mortgage broker for suitable mortgage advice.
Can I get a mortgage for a flat above the shop with bad credit?
Yes, you can get a mortgage for a flat above shop with a bad credit rating but you may need to contact a specialist mortgage broker.
Should I buy a flat above a shop?
Buying a property above a shop is a great way to maximise your investment returns. However, if you want to avoid the hassle of finding a tenant and dealing with maintenance issues then you should consider purchasing a property in a more convenient location.
Is there a maximum age at which I can mortgage a flat above a business?
There is no legal upper limit to how old you can be when you take out a mortgage for a property above a shop. However, most banks and building societies prefer borrowers to be under 40 years of age.
About The Author
Damian is an experienced mortgage broker, founder of NeedingAdvice.co.uk Ltd and company director. With over a decade working as a mortgage broker he has a strong understanding of hard to place mortgage cases. With hundreds of 5 star client reviews. hundreds of repeat clients his work speaks for himself.
He started NeedingAdvice.co.uk as a one man band with the philosophy of putting clients needs ahead of his own. This ethos of offering excellent customer service has helped the business grow over the years. He gets satisfaction on getting cases pushed through to offer stage where other mortgage broker and companies have failed.
Throughout his time as an adviser he has carved out a niche area of advice helping clients with their business protection requirements too. Having helped hundreds of client with Relevant Life Policies, Shareholder Protection Insurance, Keyperson Policies and other important protection requirements of large to small businesses.
At home he is a family man and likes to spend his time with his four children and wife Lisa. He enjoys going on holidays spending time with friends and going for walks.
What is a holiday-let mortgage?
A holiday let mortgage is a loan applied for the full value of the property that could be rented out while the owner remains living in the property. The term ‘holiday let’ refers to the fact that the overseas property is used as a holiday home rather than being rented out permanently. As per the latest statistics more than 80% of Britishers, planning a staycation in the UK this year which has increased the let mortgage rates.
How do I apply for a holiday-let mortgage?
To get started with a holiday-let mortgage application you will need to contact one of our overseas mortgage brokers who will discuss your needs and provide advice on whether a holiday-let mortgage is suitable for you. You can also ask them to look into the availability of a holiday-let mortgage product for you.
Can I use my existing mortgage to fund a holiday-let mortgage purchase?
Yes, you can use your current mortgage to fund a holiday let purchase. However, you will have to pay a fee when transferring your mortgage to another provider. This is due to the fact that the new mortgage lender will charge you a fee for their services. If you are interested in reading about remortgages, you can read our article.
What’s the difference between buy-to-let and holiday let?
Holiday lets are very popular property investments. You can make a lot of money renting them out. Tax reliefs are available on mortgages when letting a furnished holiday let. Buy-to-let properties are taxed less favourably than holiday lets. Also, the rental income from buy-to-let mortgages is different from holiday homes. Holiday lets are an excellent investment if you want to make additional income off your house while you’re away. You can rent out your house during the summer holidays or winter break. However, this means that you’ll need to spend a lot of time maintaining the property. You also may not be able to sell the property until after the holiday season ends. If you are interested in a holiday-let mortgage application, you can contact a specialist broker who can help you with an excellent mortgage deal.
What sort of mortgage do I need for a holiday let?
If you wish to let your property out for a short period of time, such as a few weeks, then a simple residential mortgage might work well for you. A holiday let mortgage requires a higher level of documentation compared to a standard residential mortgage. For example, you will need to show proof of rental income from the rental property. In addition, it’s important to keep track of all expenses associated with the property. It may be necessary to include these costs in the rental agreement. If you are looking for a holiday let mortgage, you should consider getting professional advice before applying.
What are the tax implications of a holiday let?
Renting out furnished holiday accommodation means you can claim capital gains relief when you sell the asset, but you’re still liable for any losses incurred during the year. You can claim an allowance for furniture, equipment, etc., and if your business makes losses, you can offset them against profits in future years. And profits from the business are counted as earnings for pension purposes.
How much rental income could I gain from a holiday home?
You can expect to earn around £2,000 per month from a two-bedroom holiday home. The amount depends on location, size, furnishings and how long you plan to stay there. If you have a three-bedroom property, you can expect to earn up to £3,500 per month. If you decide to rent out a four-bedroom property, you could earn up to £5,000 per month.
