Area: London
Amount Raised: £500k
Raising finance on buy-to-let properties situated above commercial premises is always a challenge. This is primarily due to the potential disruptions these properties can cause, which reduce the resale market and present a higher-risk asset for lenders.
There are different types of commercial premises, each with varying risk levels. Any premises considered noisy or smelly fall into the highest risk category. For example, an office typically operates only during standard business hours and is closed on weekends, whereas a pub or fast-food restaurant may be open seven days a week and into the early hours of the morning.
Often, properties above commercial premises are former residential properties. This is because the mortgage criteria for residential properties are more lenient, or the commercial premises have changed and moved into a category that is harder to finance.
We recently assisted a client whose properties were situated above a high-street bank at the time of purchase. As the bank gradually closed branches and centralised operations, their branch was replaced by a new commercial tenant—a well-known pizza chain. This change placed the client’s properties into the highest risk category of a hospitality outlet.
Despite these challenges, we were able to arrange a loan for the client at a competitive interest rate, with pricing similar to that of an HMO property. The lender accounted for the risk of lending above commercial premises but, unlike other lenders, did not require additional surveyor comments. This was due to their clear and defined instructions for their surveyor.
Approaching the right lender is crucial when refinancing an asset of this nature. If you are in a similar situation, we would be happy to discuss the options available.