Mortgage for a flat and shop combo

CaveMan_2

Hi all,

My girlfriend and I have been looking to purchase our first home and have stumbled upon a place that has a shop portion and a flat portion. For our budget in the given area, the flat portion is considerably larger than anything else we've seen. The sale includes the freehold of both flat and shop.

We would prefer to let the shop section out to help pay the mortgage and live in the flat. But alternatively, it'd make for a massive house, replacing the shop front with a door if that helps with a residential mortgage. (The shop portion would make for a massive lounge!)

I'm a little lost on where to begin, we have a residential mortgage agreed in principle, but I'm not sure that it will cover it - even if we treat the whole thing as a house. We don't want to make an offer we can't actually finance. If we have to purchase it on a commercial mortgage, is it best to purchase it as a company for tax or liability reasons?

Any help or advice from those who've been there or have knowledge in this area would be greatly appreciated.

glosoli

As far as I am aware although may be wrong, the house element will have to be entirely separate in it's own right from the shop, i.e on it's own title, and have it's own separate entrances and exits. If you are looking to combine the two together, then this work would have to be done prior to obtaining a residential mortgage on it.

Owain_Moneysaver

You will need planning permission to change the shop into residential, and although many councils are supportive of commercial to residential conversions, in some areas they are concerned about loss of high street commercial space.

CaveMan_2

Thank you both for your input. So I guess the next step is to determine if there are two titles, and see what we can work there. I imagine planning permission and pre-purchase work, are unlikely before moving in. I assume this means that commercial mortgages are the only option that are then available to us. That's a shame as I don't think we can pull together a 30% deposit.

Thanks again for your help.

davidmcn

This is more in the realms of a self-build mortgage, rather than a "normal" commercial mortgage (i.e. for an operating business). Sounds like a non-starter if you don't have enough cash anyway.

lovinituk

We purchased this type of property last year. Flat and shop on one title. Shop is used for our business and flat was overflow storage but is currently being refurb'd to let out.

We had to get a commercial mortgage and put down a 25% deposit. As far as I know you won't get a residential mortgage on it.

CaveMan_2

We have roughly a 15% deposit, maybe a touch more. You're probably right David, it's probably a non-starter.

Lovinit, with your 25% deposit, please could you comment on the difference between the rate you got on the commercial mortgage vs the rates on residential mortgages? I understand that it's roughly a 1% difference, is this correct?

Thanks.

lovinituk

CaveMan wrote: »

We have roughly a 15% deposit, maybe a touch more. You're probably right David, it's probably a non-starter.

Lovinit, with your 25% deposit, please could you comment on the difference between the rate you got on the commercial mortgage vs the rates on residential mortgages? I understand that it's roughly a 1% difference, is this correct?

Thanks.

I'll dig it out for you later.

I might be wrong but I don't think you would get a commercial mortgage if you wanted to live in it, much like buy-to-let mortgages. My wife and I took the mortgage out as a partnership and rent it back to our company. The bank required a charge (I forget the actual name) against the company as security.

Also the maximum term on commercial mortgages is usually 15 years and normally can't be interest only.

lovinituk

CaveMan wrote: »

Lovinit, with your 25% deposit, please could you comment on the difference between the rate you got on the commercial mortgage vs the rates on residential mortgages? I understand that it's roughly a 1% difference, is this correct?

Have looked it up for you. We are paying 3.56% on a variable rate, 15 year term.

We may have been able to find cheaper but time was of the essence so we went with the bank that we have our personal and company accounts with. It meant it went a bit smoother as they could already see several years of banking history with them.

CaveMan_2

Brilliant, thanks lovinituk. Much appreciated!