Finding a mortgage to join 2 properties

holly_hobby

Ok, its just that in your initial post you said you didn't really need a mortgage to purchase - at least we know this is no longer accurate.

You won't in my experience secure a residential mortgage on this, with the propositions you have - for the reasons given.

I do suspect the stories of individuals whom you have said have done this very conversion, whilst the properties were mortgaged, aren't completely accurate (their version, not your quotation made here of course).

So unless you can self finance this pre-conversion, and then merge deeds etc and seek a mortgage on the single unit - I am afraid that I don't know of a solution for you (other than running it by a self build lender - such as Nationwide BS whom may give you a bit of guidance. As I said earlier I doubt this will meet SB criteria, but give it a go even if just as an exercise to exhaust all possabilities).

Hope this helps

Holly

DVardysShadow

holly_hobby wrote: »

So before you do go down the road, have a chat with a couple of estate agents, discuss your proposals and try and get a guide as to how they feel the combined unit would be viewed and considered in the general property market. As whilst it is currently attractive to you and your requirements, the lender and even yourself, must consider how easy it will be to sell on if required. (or how easy and the costs involved, it would be to convert back to 2 singular units (simply re-splitting the deeds as part of the convenyencing process).

To convert back will require physical work. For a start, to convert will require a substantial amount of work to combine the electrical installations. It is not safe to have 2 separate installations. So this will need to be put back for the units to be separately saleable - unless the units are kept separate and the communication between the 2 is via a covered way between the 2 back doors. In which case I don't see the mortgage as a problem.

holly_hobby wrote: »

You mentioned in your initial post that you don't in fact need a mortgage to purchase the property - and I go back to my original advice to pch for cash, seek your own lenders permission to convert, complete the conversion and have new title deeds drawn, whilst remortgaging at the same time if necessary. But you have to consider whether the combined single unit will be acceptable security for a lender i.e will they be able to easily dispose of the property upon any possession order - they will be guided by their surveyor who may feel that the property (post conversion) isn't an attractive (both visually and/or serviceability) dwelling for the general market - and recommend the lender refrain from securing finance on it.

OP has given an estimate of the values involved and is quite realistic that the whole will be worth less than the sum of the parts. You suggest a 2 storey extension - and I agree that this would be viewed as marketable and mortgageable.

This being the case, plainly a 2 into 1 conversion will be equally if not more desirable. Possibly the cost of the 2 into 1 will make the financial case for a 2 into 1 poorer than for the extension. But OP's costings make it look quite close.

So as far as I can see, the 2 into 1 conversion will be entirely marketable. And I cannot see any good reason for it not to be mortgageable at some value.

The only problem with it seems to me to be that the lending proposition is so unusual that no lender can get their heads around lending into this conversion. But I have no doubt that the same lenders would not bat an eyelid at a new lend to a buyer on the completed conversion, assuming all permissions were in place.

Perhaps the place to go is to a surveyor for advice. I am sure that those who deal in cottage conversions will have dealt with similar.

holly_hobby

Whilst I would hope that the conversion would be seen as desirable, I have from experience seen 2 in 1 property conversions quoted as "not suitable" for mortgage purposes by the Surveyor - simply down to the fact that they don't believe it offers suitable security to the lender. As I say it all depends on quality and details of the conversion - I do believe that she should have a chat with local EAs with her proposals to determine how the market would view it, and the apx value post conversion.

Yes as already stated to the OP - the easiest way to do this would be to self fund, amend title and secure a singular mortgage on the singular unit.

The OPs issue is that they actually need finance to pch the property to perform the conversion - and that is where the issue lies. If she were to pch for cash, and her existing lender gave permission for the joining of the 2 units, that would make this easier - as would if the same lender effected the mortgage on the 2nd unit to pch. This would be determiend by LTV, the estimated devalue pre-completion, and unit value once changed and registered as a single dwelling. (in that case the original 2 x singular mortgages would redeemed with the lender, and replaced by a single mortgage on the revised title deeds and LR amendment).

My own experience with enqs such as this, is that the properties were purchased for cash, converted and then mortgaged - it requires significant funding and is really an area of developers due to the cash issue (although layman do of course successfully perform such works, but again, in my experience it was self funded until sign off - and there were issues with the existing mge lender with regards to the intrim effect the works (pre completion) had to their security.

As stated earlier, the issue is 2 single units, with 2 diff mge lenders and the proposed works, effect to property and perceived security. If the OP could persuade their existing lender to finance the 2nd unit - it would be a more coherent solution - as the same lender has security on all units involved in the conversion. Then once converted, amend titles and amend mortgage borrowing/security as necessary (which will prob involve the redemption of existing 2, with borrowings then combined on one new mortgage account (subject to status of course).

If her exis lender is not happy to proceed, as already stated I would try a self build lender (such as Nationwide) for a quick run through of what they wish to achieve. As stated earlier, SB release in stages and in relation to the construction/re-development of one unit, but its worth a chat with them. The LTvs on the single unit(s) to be initially mortgaged will have to be healthy (to over ride the intrim value issues pre-completion), and it may involve moving their exis mge to the lender (for the reasons above, subject to status and may involve ERCs), but if it achieves the desired end result it may be a quantifible soultion.

I do think though that this is a self fund scheme or developer loan (rather than residential mge) issue.

Hope this helps

Holly

v_g_and_f

holly_hobby wrote: »

The OPs issue is that they actually need finance to pch the property to perform the conversion - and that is where the issue lies. If she were to pch for cash, and her existing lender gave permission for the joining of the 2 units, that would make this easier - as would if the same lender effected the mortgage on the 2nd unit to pch. This would be determiend by LTV, the estimated devalue pre-completion, and unit value once changed and registered as a single dwelling. (in that case the original 2 x singular mortgages would redeemed with the lender, and replaced by a single mortgage on the revised title deeds and LR amendment).

My own experience with enqs such as this, is that the properties were purchased for cash, converted and then mortgaged - it requires significant funding and is really an area of developers due to the cash issue (although layman do of course successfully perform such works, but again, in my experience it was self funded until sign off - and there were issues with the existing mge lender with regards to the intrim effect the works (pre completion) had to their security.

As stated earlier, the issue is 2 single units, with 2 diff mge lenders and the proposed works, effect to property and perceived security. If the OP could persuade their existing lender to finance the 2nd unit - it would be a more coherent solution - as the same lender has security on all units involved in the conversion. Then once converted, amend titles and amend mortgage borrowing/security as necessary (which will prob involve the redemption of existing 2, with borrowings then combined on one new mortgage account (subject to status of course).

If her exis lender is not happy to proceed, as already stated I would try a self build lender (such as Nationwide) for a quick run through of what they wish to achieve. As stated earlier, SB release in stages and in relation to the construction/re-development of one unit, but its worth a chat with them. The LTvs on the single unit(s) to be initially mortgaged will have to be healthy (to over ride the intrim value issues pre-completion), and it may involve moving their exis mge to the lender (for the reasons above, subject to status and may involve ERCs), but if it achieves the desired end result it may be a quantifible soultion.

I do think though that this is a self fund scheme or developer loan (rather than residential mge) issue.

Hope this helps

Holly

Can I remortgage to secure funds to purchase next door outright?

No with my existing lender though... Santander... too mainstream perhaps?

How does a self build work exactly?

Thanks!

holly_hobby

As stated earlier, a self build mortgage, is a mortgage released in stages at each build stage. And is used to finance the building of a property as it progresses, a property which will be the applicants main residence on completion. Try the link for a brief guide - http://www.godirect.co.uk/mortgages/self-build-mortgage.php

To correct my earlier post - I believe NWide may now be out of Self Build market, but that Halifax may be a good High St point of reference.

You could seek an equity release mortgage - the acceptance of the reason would be down to the lender, and you would obviously need extra capital to fund the purchase (as you wont be able to achieve 100% equity release).

You need to speak to a broker and/or try the avenues suggested ..
as we are starting to go round in circles a little without getting any further forward.

Hope this helps

Hollly

Conrad

As you want to susequently merge the properties this is one for a specialist lender with specialist lender interest rates and fees. Such lenders for this case will expect you to want to remortagage away from them asap and back to a normal much cheaper lender, which is why they charge high rates and fees as you wont be with them long so they have to secure a profit quickly. As such on say a £100,000 loan you would end up paying them something like £15000 in costs and interest over 18 months. Maximum ltv against realisable value (which could be varying and lower during the build process) would be about 55%.

This may seem steep but you need to put yourself in thier position - of you had staff and other costs and only a short time to make a profit from each client, you too would likely charge such rates, afterall, as a lender you might as well invest your money in an ISA and not have all the hassles and worries, so to make things worthwhile the rates are always going to be high.

No ordinary lender has the ability to deal with this case as they are simply not set up to have complex deals like this on thier books which could cost them dearly - for example say the owners went mad / fell out / died (insurance can not be relied upon to pay out - what if the applicant lied about thier health) halve way through joining the properties. Ordinary Bank staff would not have the experience / time / systems to deal with this.

v_g_and_f

Conrad wrote: »

No ordinary lender has the ability to deal with this case as they are simply not set up to have complex deals like this on thier books which could cost them dearly - for example say the owners went mad / fell out / died (insurance can not be relied upon to pay out - what if the applicant lied about thier health) halve way through joining the properties. Ordinary Bank staff would not have the experience / time / systems to deal with this.

I hope that wouldn't happen... we've been told it's only a 2 day job!