Commercial to residential purchases

ended 28. April 2021

5 responses from the Newspage community

"It can be more difficult to secure a mortgage on a property that was previously an office or shop and this tends to centre around two issues: construction type and the deposit a buyer has available. "Office blocks are built to different specs than residential buildings, and this can be an issue for mortgage lenders if they don't typically lend on steel and glass high rise buildings. "With regard to deposits, when there has been a change of use from commercial to residential and a significant refurbishment most lenders will treat these properties as new builds. "This will mean that the typical deposit will need to be higher from a buyer as lenders generally require more of a deposit on new builds and even more on new build flats."
"It is definitely harder to obtain a mortgage if the converted property is above or adjacent to a commercial property. "A lot of lenders will deem this type of property to be less desirable and therefore harder to sell in the event of a repossession. "Also, if a property has been converted within the past two years, some lenders will consider this property a new build. "In this scenario, lenders will typically require a much higher deposit to be provided compared to an older property. This can therefore be very restrictive for some buyers."
"With so many empty shops and offices, more developers will be looking at commercial units and thinking about turning them into homes, especially if they can get them at a good price. "Converted office blocks and industrial estates can be difficult to finance through the big mortgage lenders, while shops can also be tricky, especially when they are close to takeaways or betting shops. "A converted property will typically be treated as a new build so it is likely to be subject to restricted borrowing limits. This means it is difficult for many first-time buyers, particularly if they have a smaller deposit. "We regularly get enquiries from clients who want to turn once large houses converted into flats back into family homes, and while there are options, not all lenders are keen to provide finance."
"If a property is to be lived in its current state for the first time, it will be classed as a new build by the lender. "Therefore, borrowers will normally have to put down a deposit of 15% or more, which will be an issue for some. "High rise buildings and properties above or adjacent to commercial premises are also generally more problematic, which are obviously common in the City. "But I am sure lenders will be keen to adapt their criteria to suit current trends and Government initiatives, so we should see improvements in this space shortly."
"Checking build warranties will be especially important given that mortgage lenders will want to ensure these are in place. "Some lenders may also restrict the Loan to Value (LTV) because they will class the property as new build, meaning buyers may need access to more cash upfront."