Get a Mortgage For a Property Near Commercial Premises

Can I get a mortgage near commercial premises? 

Yes, it is possible to get a mortgage near commercial premises. However, not all lenders will accept this. This is because properties near commercial have lower demand from buyers. It is often seen as a negative due to the potential noise or smell of the commercial premises.

 

Although, in some instances it can be a positive, if close to an attractive landmark / shop / restaurant/ pub. Additional, if the property is in a city centre, it is likely to be less important, compared to a rural property. This is because city centre properties tend to have higher demand and buyers are expecting a certain level of noise/smell due to the busy location. 

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It is also matters if the commercial premises is on the same legal title or if it is on a separate title. Often, if you are purchasing a flat above a shop, it will be on the same freehold title, however, will have separate leasehold titles. Sometimes, there will not be separate leasehold titles, which would make the property 'mixed-use' or 'part residential and part commercial'. 

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The geographical location and property value is very important. Properties in tourist destinations and city centres have a better outlook in the mortgage market.

Does the type of commercial premises matter? 

The short answer is yes. There is list of commercial premises that certain lenders will not allow. These include:

• Bars

• Pubs

• Nightclubs

• Takeaway 

• Dry cleaners

• Garage

• Gambling shops

If your current property or a property you are looking to buy to next to, above or below one of these commercial premises, it doesn’t mean it is not mortgageable. However it is does make it much harder to get a mortgage. Additionally, it is likely you will only find this out later in the process, once you have paid your valuation fee. These are often non-refundable. It is best to discuss your property with a mortgage advisor. 

Higher risk lending

If the security property is near a commercial outlet, it is seen as higher risk lending. As a result, interest rates tend to be higher than a standard property. 

However, you may be able to save money on the purchase price, as these type of properties tend to attract less buyers (especially as it is difficult to get a mortgage). 

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Valuation Challenges

It is difficult for surveyors to provide suitable valuations for properties near commercial properties. This is often due to a lack of comparable properties and strict criteria from lenders. In many instances, people will pay for valuations in the mortgage process, only to find their property is not mortgageable. Lenders often advertise that they will consider these properties 'subject to valuers comments'. Without industry insight, it is difficult to understand which lenders actually have the appetite to lend on these properties and the ones which overwhelming decline.

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Highstreet lenders, such as Barclays, Natwest and Nationwide will consider properties near desirable commercial outlets. For properties near undesirable commercial premises, lenders such as Together, Shawbrook, Precise will be required.  

 

What deposit do I need? 

You are likely required to put down a larger deposit for a property near commercial premises. Normally 15% is required. However, it is sometimes possible to get a mortgage with a 5% deposit. For Buy to Let applications, at least a 20% deposit is usually required.

Access to property? 

It is important to consider the access to the property. If the property has shared access, rather than it’s own access, it may be difficult to find a lender.