Can I get a mortgage - it's above commercial premises?
Getting a mortgage over a property that is over commercial premises can prove problematic. There are certainly a few things that you should know so you to understand the likelihood of getting the “green light” from the lender.
Unfortunately, even if you get through all of the hurdles, it’s pretty much going to come down to the valuer’s comments – something you didn’t want to hear because ultimately that’s outwith your control, and getting a quick answer is unlikely.
Let’s break it down
What I’m going to do here is go through the questions that the lenders would go through.
Is the property above commercial premises?
This is the first question to ask and it will come as no surprise that there are a great number of lenders who quite simply aren’t interested in allowing you to borrow over commercial premises. In the eyes of lenders, it proves more of a risk. And the risk is all about marketability. The lenders are always looking at the worst-case scenario and they are not keen on lending where there is a risk of them not being able to sell the property should the half to repossess it. – It doesn’t even matter if you’ve got a whopping huge deposit. If the lender is not prepared to lend over commercial premises then it doesn’t matter.
Is that the property above specific commercial premises?
Again there are some lenders who are prepared to lend above commercial premises but under no circumstances are prepared to lend when it is above certain types. Again this all comes down to marketability – will the lenders have any difficulty in reselling the property should you welch on the mortgage.
What’s the view of the surveyor?
So this is what it comes down to. The lenders will be swayed one way or another by the surveyor. A positive report here and you have got a fighting chance that the lenders will be prepared to go ahead. It really all does turn on what the surveyor says. A bad report here and you can forget it.
Buy to Let
It’s fair to say that the buy to let market is incredibly strict on lending above commercial premises. Based on the view that lending is dependent upon rental revenue, there is an even sharper focus from the buy to let lending community. Yes, this comes down to marketability but more importantly - how is being above commercial premises going to affect the amount that you can charge for rent and indeed whether or not you are going to get any tenants. If the lender thinks that you're going to struggle to rent it out then it's not going to lend.
There is no point in flogging a dead horse. As a purchaser or an investor, you need to know as quickly as possible whether or not the lender is going to look at your property. The difficulty however is that no lender is going to give you a categoric “green light” without the surveyor casting their beady little eye over the property. Getting around this is probably easier for residential properties than a buy to let.
If it’s a residential purchase then as a mortgage broker, I can pick up the phone and speak to the surveyor who did the Home Report - he is the one that the lenders are going to rely upon! I can suggest which lender we are looking at and generally, the surveyor will be able to give me a “yes” or “no” on the likelihood of success. Slightly more difficult where it’s a buy to let on the basis that the lender will instruct their own valuation so we don’t know who the surveyor is. I can still however lift up the phone to one of my contacts and get a pretty good steer as to the probability of success.
Try - Birmingham Midshires. The Mortgage Works, Aldermore, Together and Shawbrook Bank
So you will now understand that it is very much in the hands of the surveyor. If the property is in a desirable location then you’ve got a chance. I recently got a mortgage through with Birmingham Midshires on a buy to let above a pub in Finnieston. The chances of getting that through in a flat in Maryhill are probably less likely. The Mortgage Works were prepared to look at one in the Merchant City above a restaurant but it was an Italian restaurant and it didn’t have a Hunterston size chimney at the back - they don’t like smells! As far as residential is concerned, lenders are certainly more forgiving but it will come down to the surveyor’s comments.