Purchase of a commercial premises and flat without planning permission, followed by refurbishment funding to convert residential into two further flats

The client: Our client wanted to purchase a commercial property with a residential flat above. She intended to rent out the shop and redevelop the flat into three separate flats by building an extension to the rear. Our client needed finance for the purchase and subsequent redevelopment.


The property: The client was buying a shop with flat above in Sussex, with a combined value of £332,000 (the flat was valued at £145,000, while the commercial premises was valued at £187,000). The client had a decent deposit of 40 per cent so was looking to borrow £199,200.


The finance: The client required borrowing of £199,200, with a lender that was willing to accept the client’s proposed redevelopment plans without existing planning permission and agree to further funds being available for the redevelopment once planning was approved. This approach would enable the client to save money as they would not have to do a total refinance onto development finance once planning was approved.


Key requirements: –

  • A lender comfortable with the client purchasing a commercial property with a residential flat above.
  • The ability to release further funds once planning permission had been agreed for the redevelopment of two further flats.
  • A lender comfortable with lending to a client with no previous commercial landlord experience.
  • Looking for lending on an interest-only basis.

After sourcing commercial lenders, we identified a competitive rate which would allow the client to borrow the full £199,200 on an Interest-only basis. The lender was prepared to lend on the purchase and proceed with further lending for the development once planning permission had been approved. These features and benefits really appealed to our client and we were able to submit a decision in principle and get approval from the lender before submitting the full application.


The application process: To support the mortgage application, the client supplied us with proof of identity, address and evidence of income together with full plans for the proposed redevelopment, including costs. We were delighted to inform our client that the lender had issued a formal mortgage offer for the full amount requested.


Property value: £332,000 combined (flat valued at £145,000; shop valued at £187,000).

Loan amount:£199,200

Refurbishment Facility: £144,000

Rate: 0.7% on initial loan, 0.76% on refurb facility

Term: 12 months initial loan term; 15 months on refurb facility

Lender completion fee: £3,488 on initial loan; £3,845 on refurb facility (added to the loan)

Monthly payment: (Costs deducted from advance on completion)

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