How To Get A Mortgage For Flats Above Shops: A Guide

Flats above shops aren’t always the obvious choice, but they can be a smart one. 

You get a central location, a good deal on the price, and the added convenience of being right above a local business.

But buying one of these properties comes with its own set of challenges—like getting a suitable mortgage.

Don’t worry, though—we’ve got the details to help you make an informed decision and get the best deal possible.

This article covers everything you need to know before buying a flat above a shop in the UK, including tips to improve mortgage approval.

Ready?

What are Flats Above Shops?

Flats above shops are exactly what they sound like: residential flats located directly above commercial premises—whether that’s a grocer, a café, or even a takeaway. 

These properties can be incredibly convenient, putting you just a few steps away from your morning coffee or your favourite takeout. 

Plus, these flats often come with a lower price tag compared to standard residential flats in the same area. 

But there are some strings attached, like extra considerations for mortgages and insurance.

What Should You Consider When Buying a Flat Above a Shop?

Before you start mentally arranging your new flat, there are a few things you should think about. 

Firstly, the type of shop below is important. A lovely, quiet bookshop? No problem. A late-night bar? Maybe not so ideal if you’re after some peaceful sleep.

Noise and smells are big factors—if the business below is bustling, it might affect how tranquil your new home feels. 

You’ll also want to check the terms of the shop’s lease. What happens if the shop changes hands or its business hours increase? These are details that could make or break your comfort living there.

Access is also a thing. Does your flat have a separate entrance, or do you share access with the shop? 

Independent access is typically more desirable, and easier to deal with in terms of mortgage eligibility.

Lastly, check out those service charges. If the building needs maintenance, the service charges could be split between you and the shop—and sometimes commercial properties have higher service costs.

Best to know what you’re in for from the get-go.

Can You Get a Mortgage for a Flat Above a Shop?

The short answer is yes, you can get a flat above shop mortgage. But, it’s a bit trickier than getting one for a typical flat.

Because of the higher perceived risks—noise, unsociable hours, or even potential fire hazards—some lenders are hesitant about lending on these properties. 

They’re worried about what happens if they need to repossess and sell it on—after all, not everyone’s dream flat is above a kebab shop.

Luckily, there are plenty of lenders who are up for it. Specialist brokers can match you with lenders who are happy to give mortgages for flats above shops. 

What About Buy-to-Let Mortgages for Flat Above Shop?

If you’re considering renting a flat above a shop as a landlord, the process is a little different. 

Most buy-to-let mortgages are assessed based on projected rental income, rather than your own salary, which can be helpful. 

However, lenders often expect higher deposits (often around 20% above) for buy-to-let mortgages on flats above shops, especially if the shop is a takeaway or late-night bar—you know, those trickier ones we mentioned earlier. 

Renters love a good location, though, and a flat right above a shop in a central area can be really appealing.

How Much Could You Borrow?

As with most mortgages, how much you can borrow depends on your income, any debt, and other financial commitments.

Lenders are typically happy to offer up to 4.5 times your annual income, but with flats above commercial premises, they might be a bit stricter.

The maximum loan-to-value (LTV) ratio might also be capped lower. 

For instance, while regular residential flats might offer up to 90-95% LTV, flats above certain businesses might see this reduced to 75%, meaning you’ll need a bigger deposit.

Eligibility Criteria

Lenders want to make sure you’re a safe bet before handing over their money, so eligibility criteria for flats above shops can be a bit more involved. 

You’ll need:

• A decent deposit – Typically at least 15%, but often more for riskier commercial premises.
• Good credit – The better your credit file, the more likely lenders are to look favourably at your application.
• Employment status – Lenders want stable income, whether it’s salaried or self-employed, so your job status is important.
• Details on the shop below – This will include its commercial category, opening hours, and any lease restrictions. The more ‘quiet and sensible’ the shop below is, the easier it will be.

Commercial premises fall into a few main categories, including A1 to A5 types and a few others worth knowing about:

• A1: Shops, such as grocery stores, hairdressers, and post offices.
• A2: Financial and professional services, like banks and estate agents.
• A3: Restaurants and cafés.
• A4: Pubs and bars.
• A5: Hot food takeaways.
• B1: Offices and light industrial units that may coexist with residential spaces.
• C1: Hotels, boarding houses, and guest houses.
• D1: Non-residential institutions, such as clinics or schools, which may sometimes be found below residential flats.

How To Improve Your Chances of Getting a Mortgage?

If you’ve got your heart set on buying a flat above a shop, a good mortgage broker is your best friend. 

They’re clued up on which lenders are happy to offer a flat above shop mortgage and how to present your case in the best light. They’ll make sure you’re not wasting time applying to lenders who are going to say no.

Saving a larger deposit can also boost your chances, as it makes you a less risky prospect. 

A clean credit history and a stable income will also work wonders when convincing a lender to approve your mortgage.

Can You Buy Both the Shop and the Flat Above?

Absolutely! If you want to buy both the shop and the flat above it, you’ll likely need a semi-commercial mortgage. This kind of mortgage is a bit of a mix—covering both residential and commercial property under one product. 

It’s a little more complex, but the benefit is that you can have control over both the flat and the business below, which could be handy if you’re a landlord. 

Alternatively, you can also opt for two separate mortgages—a commercial mortgage for the shop and a residential one for the flat—but this might complicate things a bit more.

What Are the Potential Legal and Lease Issues?

With any flat above a shop, it’s essential to dig into the lease details. 

Does the shop have a lease that might cause issues, such as allowing excessive noise or frequent changes in tenancy? And if you’re buying a leasehold flat, will you be able to extend the lease when the time comes? 

Remember, the rules around leaseholds are changing, and you might need legal advice to understand your rights if the building is a mix of residential and commercial spaces.

What Are the Practical Considerations When Living Above a Shop?

Living above a shop has its perks—popping downstairs for milk at 10 pm sounds ideal—but there are also some practical points to think about. 

You’ll want to make sure there’s good soundproofing so the noise of customers doesn’t keep you up, and that access to your flat is separate. 

The last thing you want is to have to pass through the shop to get to your home.

Also, consider parking. Is there a designated space for your car, or will you be competing with shop customers for street parking? 

It’s worth checking, as it could make a big difference to your day-to-day convenience.

Is It Harder to Get Insurance for a Flat Above a Shop?

Insurance can be a bit trickier with flats above shops, particularly if the commercial premises have a higher risk—like takeaways or bars.

You’ll likely face higher premiums for contents and buildings insurance, and some insurers might be unwilling to cover you at all. 

Shop around, and get quotes before you buy, so there are no nasty surprises later on.

The Bottom Line: Is Buying a Flat Above a Shop Worth It?

Flats above shops certainly come with some unique challenges, but they can also offer great value for money and a super convenient location. 

The trick is to go into it well-prepared. Make sure you’re comfortable with the shop below, have realistic expectations about what living there will be like, and get some expert advice on the mortgage front.

Working with a broker who knows the ins and outs of these types of mortgages can make a huge difference. They’ll help you find the right lender and make the whole process smoother.

If you’re ready to take on the quirks that come with buying a flat above a shop, it could be a perfect fit for you. 

And let’s face it—the idea of rolling out of bed and grabbing a latte downstairs does have its appeal!

Get in touch with us, and we’ll connect you with a qualified mortgage broker who can help you make it happen.