Restaurant property finance
Finance for a restaurant or café at ground level with a self-contained flat above on one title.
Financing restaurant or café with flat
A restaurant or café with a flat above is a semi-commercial asset that pairs a ground-floor food and drink unit with self-contained residential accommodation on the upper floors. Many investors buy these for the buy to let income from both parts: the commercial rent from the restaurant lease and the residential rent from the flat. Because the property mixes uses, it is funded with a semi-commercial mortgage and stressed on the combined rental income rather than as a residential flat alone.
We arrange the finance and introduce you to lenders, we do not lend. Restaurant finance here means property finance, not a catering or fit-out loan, and we cover the full range: a term mortgage to hold or to trade from yourself, bridging to buy quickly or at auction, light or heavy refurbishment finance to refit the unit or refurbish the flat, and development finance to build more flats above. Lenders pay particular attention to the food-use class below the flat, since cooking smells and hours can affect the residential letting and the valuation. A flat with its own street entrance, an extraction system that vents away from the windows, and a solid restaurant tenant all lift the case. Where you intend to live in the flat yourself, the loan can fall under FCA-regulated rules and we refer those to a regulated firm.
Configurations we finance
- Restaurant with one self-contained flat above
- Café or coffee shop with residential upper floors
- Food unit let to an operator with a separately let flat
- Owner-occupied restaurant with the proprietor living above
Indicative terms
- Indicative rate6.5 to 8.5% a year
- Loan to valueUp to 70 to 75% of value
- Deposit25 to 30%
- Affordability125 to 140% ICR on combined rent
- Term5 to 25 years
Indicative only. Terms vary by lender, property and borrower and are not an offer of finance.
How we fund a restaurant or café with a flat
For a hold, we size a term loan on the combined restaurant and residential rent at an interest cover ratio of around 125 to 140 percent, to 70 to 75 percent loan to value with a 25 to 30 percent deposit, on a 5 to 25 year term at 6.5 to 8.5 percent. An owner-occupier running the restaurant is tested on business affordability and can reach 6.0 to 7.5 percent. Where a deal must complete fast or is bought at auction, semi-commercial bridging at about 0.70 to 0.95 percent a month carries it to a term refinance. Where the unit needs a refit or the flat needs work before letting, light or heavy refurbishment finance funds it, a bridge-to-let facility runs the works and term loan together, and a scheme adding flats above is funded by semi-commercial development finance on a loan to cost and GDV basis. Lenders weigh the rental income from each part, the strength of the food tenant, and how well the flat lets given the use below, so a separate residential entrance and good sound and odour separation materially help the valuation.
Lender appetite for food premises with flats
Specialist lenders such as Shawbrook, InterBay Commercial, Together, Cynergy Bank and Aldermore fund restaurants and cafés with flats above, pricing on the combined rental income and the quality of both parts. Lenders are more cautious where a hot-food or late-licence use sits directly under the flat, and more comfortable where extraction is well managed and the flat has independent access. A clean letting history on the residential part reassures the valuation and broadens the field of willing lenders.
Exit and refinance options
The standard exit is a term refinance once both parts are let and the rental income is proven, often onto a semi-commercial remortgage to release equity or fix a better rate. Where the restaurant is being refitted or re-let, or the flat needs work before it can be tenanted, semi-commercial bridging can fund the purchase and works and exit onto a term loan when the rent roll settles. Splitting and selling the flat on a long lease is possible but changes the use mix and future financing.
Finance structures that suit this sector
- Semi-commercial mortgageCore term loan across the restaurant and flat.
- Semi-commercial investment mortgageFor a buy to let investor holding both parts for rent.
- Owner-occupier semi-commercial mortgageWhere you run the restaurant yourself.
- Semi-commercial bridgingFast or auction purchase, or a refit before a term refinance.
- Heavy refurbishment financeRefit the unit or refurbish the flat before letting.
- Semi-commercial development financeBuild flats above on a loan to cost and GDV basis.
Finance a restaurant or café with flat
A view on lenders and likely terms within one working day.
What drives a restaurant and flat's numbers
A restaurant or café with a flat earns a commercial food-unit rent and a residential rent, and lenders blend the two into the income that sets the valuation. They capitalise the combined rent at a semi-commercial yield and stress it at an interest cover ratio of around 125 to 140 percent. The food use below tempers the residential value, so extraction, odour control and a separate flat entrance all feed directly into the achievable rent and the appraisal.
Indicative restaurant with flat rates
We arrange semi-commercial mortgages on a restaurant or café with a flat from 6.5 to 8.5 percent a year, to 70 to 75 percent loan to value with a 25 to 30 percent deposit over 5 to 25 years. An owner-occupier running the restaurant can reach 6.0 to 7.5 percent on a business-affordability test, and a refit or re-let can be funded on semi-commercial bridging at 8.5 to 11 percent before a term loan takes over.
Frequently asked questions
Can I get a mortgage on a flat above a restaurant?
Yes, usually as part of a semi-commercial mortgage covering the restaurant and the flat together. Specialist lenders fund these on the combined rental income, with the strongest cases having a flat with separate access and good odour control.
Why are lenders cautious about flats above food premises?
Cooking smells, extraction and trading hours can affect the residential letting and resale, so mainstream residential lenders often decline. Specialist semi-commercial lenders price the whole building on its combined commercial and residential rent and are comfortable with the use below.
Can you get a mortgage on the restaurant on its own?
Yes, as a commercial or owner-occupier mortgage, but where the flat shares the title it is usually more efficient to fund the whole building together on a semi-commercial facility sized on both income streams.
What rental income do lenders use?
Lenders combine the commercial rent from the restaurant lease and the residential rent from the flat, then stress that total at an interest cover ratio of around 125 to 140 percent to size the loan.
Financing a restaurant or café with flat?
Tell us about the property and we will come back with a view on lenders and likely terms.