Mortgage on a flat above a shop

oli271

Hi,

My father owns a building that houses a shop downstairs and a flat upstairs. I want to buy the flat from him to live in for a few years, with a view to possibly buying the entire property in the future. I'm aware that flats above shops are a little different to normal mortgages so any help would be appreciated. Here are the pertinent facts:-

The shop downstairs is a copy shop, i.e. photocopies, business cards etc. It is open 9-5 M-F, creates no noise, smell and takes few deliveries (obviously paper is the main material used)

The flat upstairs is liveable in right now, but will be redecorated and will have a new bathroom and kitchen. I don't think this counts as a new build?

However, at present the flat and shop are connected. The redecoration includes the separation of the two, so they will end up sharing a vestibule that has a door on to the street then there will be two front doors, one to the flat and one to the shop. At no point do you have to enter the shop to get into the flat.

The building is owned by my father so any significant changes to the shop downstairs will be governed by him.

There is a Chinese takeaway a few doors down (smell/noise concerns?).

I spoke to Nationwide who seemed happy about the situation but it makes me nervous!

Any help would be great, thankyou!

holly_hobby

The flat will need to be completely self contained with its own entrance, and of liveable quality i.e kitchen, bathroom fitted.

You already seem pretty clued up that flats above commercial prems can be a problem - dependant on the nature of the business downstairs, adjactent business premises and those in the immediate proximity i.e row.

The chinese takeaway may be an issue - as your rightly say smells, rubbish, opening hrs and foot traffic and noise i.e late night taxis and cars pulling up etc.. you get the idea.

It will ALL depend upon the surveyor ... a general bod in NWide who is not a mge underwriter cannot be relied upon to give accurate info.

If you don't want to risk spending a val fee and it coming back negative, you may want to seek a whole of mkt broker to assist - they will have the contacts and knowledge to be able to sound out the proposition before you submit an app & spend your survey fee (which is none refundable if the mge is not approved).

Are any of the other flats above the commercial prems privately owned? This would give a good indication as to how surveyors view the takeaway and area in general.

Hope this helps

Holly

eryn_kathleen

I can't say for certain in your situation, but oddly enough both my friend and I have just had this issue when looking at flats. Neither of us ended up buying the flats above shops, but we did do some checking into the mortgageability and home insurance aspects.

We both used different mortgage brokers. Hers told her that as long as there wasn't a deep-fat fryer in the shop immediately below, there were no mortgageability concerns. Mine contacted all the major mortgage companies individually, and all but two (can't remember which) said the same thing - no deep fat fryer, no problem. Some did have a deposit minimum of (I think) 25% for flats above restaurants, and the two exceptions said they wouldn't mortgage flats above restaurants at all. I don't remember any of them having a problem with flats above regular shops, though - and I was looking at a flat above a post office as well.

Home insurance rates do go up slightly depending on the type of shop and proximity to the flat. My friend eventually settled on a flat next to a corner shop/off licence, and her insurance is around £2-3 a month more to cover the increased traffic in the evenings. I'm guessing anything to do with cooking would mean a larger increase, but as the Chinese isn't directly below you I wouldn't think it would be too much of an impact.

Overall, though, I would definitely suggest a mortgage broker. Mine did quite a lot of checking on a lot of different types of properties and also arranged home insurance for me - although I didn't end up moving over a shop, I did move to an area with flooding risk, so there were some tricky things to sort out and I would have been lost without his expertise. Also, as holly hobby says, you'll save a lot on survey fees by having the broker do the legwork beforehand.

Senior_Paper_Monitor

From the Nationwide Intermediaries criteria ....

Flats Over Commercial Premises


In addition to the usual construction and marketability criteria, the acceptability of flat over commercial properties will depend on:

• Nearby commercial activities. If any commercial activities in the block are likely to cause a nuisance by virtue of noise, smell or unsocial hours, we may not be prepared to lend on the flat.
• Access. Some flats over commercial premises have unsatisfactory access which may involve passing through the business area, through yards containing commercial refuse, or using poorly maintained external stairs. If any of these factors apply we may not be prepared to lend.

We recommend you contact us with as much information as possible at enquiry stage to allow us to contact a valuer for advice before issuing formal valuation instructions.




Generally these properties are real dogs to place (leashold / freehold issues can also add to the grief) and may well represent future resale problems.