When it's cheap but not nasty living on top of a high street

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The Independent Online

"Going up in the world" was probably never intended as a reference to buying your home over a shop or office.

The potential for noise, disruption and smells from commercial premises has tended to put most buyers off, despite a usual price discount of about 10 per cent for the flat's position.

Yet with house price inflation putting many properties out of reach, first-time buyers are now more prepared to have a shop underneath them. This is particularly the case when new flats are built on top of retail developments in city centres.

According to a rough estimate from estate agents, properties above shops now account for anything between 5 and 15 per cent of all sales.

Nik McLachlan, a 27-year-old tax manager, bought a new-build flat above a pharmacy in Swindon in February. The developer put an initial price tag of £119,950 on the two-bed property with split-level mezzanine, although Nik paid considerably less.

"For the price, the space is fantastic: three times bigger than some other flats I had seen in the area costing £135,000."

The pharmacy shuts at 6pm, he adds, and makes no noise.

Nor did getting a mortgage on the property - in Nik's case, for 95 per cent loan-to-value from Nationwide - prove too much of a problem. But that was largely because of the nature of the premises underneath. Lenders are cautious about handing over money for a property they feel might be harder to sell than a more conventional home, and assess commercial premises according to various classifications.

It shouldn't be too much of a problem getting a loan for a flat above any general retail store or professional or financial services company, such as a bank or estate agent - especially if it has a long lease, making it easier to sell on in the future. Abbey, Nationwide and Norwich & Peterborough (N&P) are among a number of banks and building societies that say they will consider lending above such premises, with the usual products and rates (though Abbey won't advance more than 90 per cent).

However, borrowers will struggle to find a loan for any home where there is a higher than usual risk of fire or damage. "As a rule, we wouldn't lend on flats above takeaways, restaurants or pubs," says Paul Rippon, N&P's head of banking and mortgage operations. "In other words, anything that could have a potentially detrimental impact on the value or saleability of the property [would cause the application to fail]."

However, if the flat is in a highly desirable part of town, the loan isn't too big and the borrower is deemed a good risk, lenders may be prepared to offer a deal above any of these outlets. The easiest way to find out if you are eligible is to go through a mortgage broker.

But you can get a loan on any property if you're willing to pay for it, says Louise Cuming, head of mortgages for the price-comparison website money-supermarket.com. "Specialist lenders such as London Scottish Mortgages and Victoria Mortgages [available via a broker] are extremely flexible on the type of property they will lend on - at a price."

Finally, check to see if the commercial use of the premises has a tendency to change regularly. While a switch from a café to a dentist may be welcome, the reverse won't be.

Talk to the local authority to discuss an area's history, and the chance of a detrimental change.