How Proximity to Commercial Affects Equity Release
Understanding how proximity to commercial properties impacts equity release is increasingly important for anyone considering releasing equity from their home.
At Equity Release Warehouse we regularly get asked about how a home’s surroundings influence what lenders will and will not allow when it comes to equity release in the UK.
In this article, we’ll explore why being near commercial premises matters when it comes to equity release as well as the practical implications and what to look out for. We will also discuss how you can best advice or assess a property situation if it is being considered for equity release.
Why proximity to commercial premises matters when it comes to equity release
When it comes to equity release, one of the biggest factors that influences whether or not a lender will approve a property is the saleability of the home.
A key part of a property’s value is its location and its immediate environment. This includes whether it sits next to or opposite a commercial or non-residential property.
This is because an equity release lender needs to be sure that the property will be sold and the sale of the home will cover the initial loan amount, plus an interest that has grown over the years [1]. As they say on the show, ‘Location Location Location.’
If a home is in a location that might deter future buyers, or present complications (such as noise, horrible odours, heavy traffic or even unsocial hours), the lender sees this as an increased risk.
Therefore, being next to a commercial property can change the value of your home significantly. That risk might reduce the lender’s willingness to release as much equity or may mean stricter terms when it comes to your equity release loan.
It is important to remember that equity release loans can last for decades, during which time a commercial property might open next to your home [2].
Types of commercial properties
There are numerous different types of commercial properties that equity release lenders consider an issue for all things equity release.
This includes things such as small shops or convenience stores, supermarkets, hotels, pubs, bars, restaurants and even industrial premises. This might even include car garages.
There are a number of different issues that these types of properties cause issues for homeowners, which might deter them from buying a house close to a commercial property.
As discussed above, this includes high volume of traffic, more noise, general smells, rats and even some vibrations if there is loud music being played.
1. How proximity is interpreted when it comes to equity release
There’s no fixed universal rule when it comes to proximity of commercial properties and equity release. When it comes to equity release, it very much depends on the individual property, how the commercial use is connected to your property and what it is being used for.
Your equity release lender will usually ask how close the commercial property is to the home, what the nature of the commercial property is and if there is any evidence of any anti-sociable behaviour. It is incredibly important that you need to be open and honest with your equity release lender at this point.
It is important to understand that each lender has different qualification criteria, with some lenders refusing to lend to any homeowners who have a commercial property connected or in close proximity to their property. Likewise, the property’s resale risk may reduce the amount of equity the lender is willing to pay.
2. Mixed-use properties and equity release
The situation is even more complex when the property itself is mixed-use (residential above shop, part commercial). Whilst some equity release lenders accept mixed-use properties, others simply do not.
So, for those homeowners who live in flats above shops or other hybrid arrangements, this is a red flag for many equity release lenders.
This might mean that you need to seek careful and specialised advice from either a specialist lender or specialist equity release adviser before signing on the dotted line and committing to equity release.
Advice whether you’re a homeowner, adviser or underwriter
Understanding how living next to a commercial property is incredibly important when it comes to releasing equity from your home.
Likewise, if you’re an equity release adviser or underwriter, then you too need to understand how proximity to a commercial property will also have its own impact and implications on the deal.
1. For homeowners looking to release equity from their home
If you are a homeowner, then living next to a commercial property will provide a few complications when it comes to selling your home and when it comes to releasing equity from your home, should you choose to do so.
This includes living next to a restaurant, living next to a car garage or even next to a busy doctor’s surgery.
Even if your home is not near a commercial property at the moment, this does not mean that things won’t change and that a commercial property will not be built nearby.
Remember, if you opt for equity release then you are likely to live in that house for a few decades. During this time, it is possible that a commercial property could be built near your home.
If this has indeed happened and you want to release equity from your home, then you will need to seek professional help and advice from a specialised adviser who is experienced in equity release and commercial property.
2. For advisers and brokers
If you are an adviser or broker looking to help a homeowner release equity from their home, then there are a number of things that you should be aware of. You should assess what is next to the property, or what is opposite the property.
You will also need to assess whether there has been any antisocial behaviour from the nearby commercial property, and what the implications are for neighbours and future buyers.
You might need to ask local homeowners or neighbours to get to the bottom of the impact on the local residence.
By flagging these issues early, you are therefore much more likely to identify which equity release lenders are worth approaching on behalf of your client and which ones you should avoid.
3. For lenders and underwriters
Underwriters will need to make a comment in their report on how the commercial neighbour might affect the property’s value and its current and future marketability.
The underwriter will then assess whether they are comfortable with the risk as they understand it. If there are negative comments, the case may be rejected or more interest might be charged.
Likewise, the homeowners might only be able to release a small amount of equity from their home.
Future considerations
As the equity release market grows and property valuations remain under pressure in certain locations, the issue of proximity to commercial premises may become even more significant. There are a number of things that you will need to consider.
For example, houses in more urban areas are likely to live closer to commercial properties than those living in rural communities. As cities become busier, it is much more likely that homeowners will live near commercial properties.
Likewise, future buyers might see issues such as negative environmental factors, noise, light pollution as bigger issues than current or previous generations to come.
Likewise, regulators and industry bodies like Equity Release Council may push for more transparent criteria around property suitability in the future, which could include proximity to commercial uses.
The 2024 legal guide from the Equity Release Council emphasises the need for thorough assessment of property location among other risk factors.
To conclude
To conclude, proximity to commercial premises is an important factor when it comes to whether a property is or is not eligible for equity release. For homeowners looking to release value from their home, recognising this factor early on helps avoid surprises or any disappointment.
When a home is near commercial activity, it’s not necessarily a barrier to equity release, but it does add a layer of complexity.
The key is to recognise the risk early on and then select the right equity release provider.
If you or a client is exploring equity release and your home sits in proximity to a commercial use, then speak to Equity Release Warehouse.
Our team of friendly and helpful advisers will be able to find the lender that is right for you and assess the risk.
Start your equity release journey today by calling us on 0330 058 1579 or by visiting us online by searching for www.equityreleasewarehouse.com.
References
[1] https://www.equityreleasecouncil.com/wp-content/uploads/2025/05/250502-STANDARDS-FINAL.pdf
[2] https://www.ftadviser.com/mortgages/2019/08/02/curious-reasons-for-lenders-denying-equity-release/
