Mortagage Question on selling "part" of your home

Big_Zee

Hi,

I am looking to purchase a house that is currently divided into two clearly defined flats with their own entrances.

If I purchase the property on a mortgage and then sell one of the flats and keep the other, what is the position with the mortgage?

Thanks for the help.

tyllwyd

If the original mortgage was on the whole property, I'd have guessed you would need to pay off that mortgage and arrange a new mortgage just on the one flat.

Big_Zee

tyllwyd wrote: »

If the original mortgage was on the whole property, I'd have guessed you would need to pay off that mortgage and arrange a new mortgage just on the one flat.

Yes the mortgage would be on the whole property.

So, would you incur penalty charges for paying of the mortgage early - or would those be waived if the new mortgage was with the same company?

Thanks

silvercar

Depends if the mortgage was portable. It would be a new lending decision. So subject to the bank's criteria. eg if the property is now worth £200k and your mortgage is £90k, if the new flats are £120k each, the lender may not be happy for you to retain your existing deal with £90k on a £120 property if that deal was only available on LTVs less than 50%.

namratasnv

tyllwyd wrote: »

If the original mortgage was on the whole property, I'd have guessed you would need to pay off that mortgage and arrange a new mortgage just on the one flat.

This is the right advice I am waiting for as, I do had a mortgage on one of my property and I can get mortgage on other stuff only when I pay this as, I was pretty confused about this but, now as I am getting this advice from you I will definitely get through this.

Big_Zee

silvercar wrote: »

Depends if the mortgage was portable. It would be a new lending decision. So subject to the bank's criteria. eg if the property is now worth £200k and your mortgage is £90k, if the new flats are £120k each, the lender may not be happy for you to retain your existing deal with £90k on a £120 property if that deal was only available on LTVs less than 50%.

Thanks for the advise.

The property is valued at £200K and I'm looking to get a 75% mortgage on that. The bottom flat is smaller than the top is probably worth £75K.

From what you are saying the bank would be unhappy with the situation that they would now have - IE a mortgage of £150K on the remaining flat which is only worth £125k. Therefore they would want a re-valuation and re-mortgage.

PasturesNew

You also need to look at:
- whether they are legally separated, are the services separate, both registered for council tax
- the lease situation with them both, where's the freehold.

Big_Zee

PasturesNew wrote: »

You also need to look at:
- whether they are legally separated, are the services separate, both registered for council tax
- the lease situation with them both, where's the freehold.

Thanks - the freehold is on the whole property - and both properties are registered for seperate council tax. At the moment the bottom flat is currently rented out.

Thanks