Mortgage on a business -> residential property

song_of_calliope

Hello, my partner and I are looking at putting an offer in on a property that's a former business that is advertised as suitable for residential use subject to proper planning permission.

Now, we'll have our solicitor check this aspect of the purchase out, and we won't do anything until he advises us on this. However, my question is on financing the purchase if we do decide to go ahead.

The purchase price would be around £80,000 and then would eventually need about £50,000 (estimated) to get it in really top condition. At first to be habitable, it would require about £20,000 of work, and we'd do the rest of the work as and when we'd saved up for it.

My partner and I own a house that we would sell after the purchase of the new property went through. Our house is worth £115,000 and we owe about £70,000 on the mortgage. The equity that we get back after selling we'd put into the new property.

We're fortunate in that our combined incomes are about £80,000 a year. My partner is 45, and I'm a bit younger (not going to reveal my exact age ).

So, how would we go about looking for financing on this? And do you think this is doable given our incomes and assets? We don't have any other loans apart from our mortgage. Many thanks in advance for your help.

ACG

If its not currently habbitable then you will struggle to get a residential mortgage, the same goes with it not having planning permission as yet.

Maybe a bridging loan for 6 months whilst you get it habbitable then a residential mortgage - subject to you getting planning permission.

song_of_calliope

Thanks. I should have mentioned we can put 20% down so we'd only want an 80% loan. Does that make a difference? Should we be looking into something other than a traditional mortgage?

antrobus

song_of_calliope wrote: »

Hello, my partner and I are looking at putting an offer in on a property that's a former business that is advertised as suitable for residential use subject to proper planning permission.

If there is no planning permission for residential use, then you're unlikely to get a residential mortgage on the property. It's the planning permission that's the key, and you'd need to speak to your local planning authority to establish the chances of being allowed to turn the business property into a home.

If I had to guess, I'd say you're looking at a former public house, and local planning can be (so I understand) distinctly unsympathetic to such proposals.

holly_hobby

Yep - you'll need to obain both a Change Of Use (COU), and planning permission with the Local Authority (LA), to convert to a traditional residential dwelling - obv the current vendor would have to arrange this, if you are to seek a resi mge, as you won't be in a position to pch (on a resi mge in any event, without this).

FYI - If this unit had at anytime prior to its commercial life, been a residential dwelling, then there is a good chance that the COU will being granted by the LA.

Beware though, the LA can and do, refuse COU requests - so nothing is certain ...

To secure a residential mge - the dwelling will need to be in a fairly traditional residential format, with a functioning kitchen, bathroom and utilities - if not already in this format (or something close), where is the work/who'll fund this prior to your seeking the resi mge ?

In situations like this, some individuals (they do tend to be those with access to capital), and whom are 99.9% sure that both COU and planning permission will be granted (after first consulted with the LA on it), pch with cash or commerical/development finance, complete the required re-development works, and then (if retaining as a personal dwelling) remortgage it onto a residential mge after all title amendments & signs offs have been obtained.

Not for the faint hearted ... or deep pockets !!

Hope this helps

Holly.

song_of_calliope

Thanks for the advice so far. Would I be better off looking at a business loan or business mortgage of some sort, as we plan to run a business out of the property as well?

holly_hobby

Well if you plan to run a business post completion - you are prohibited from applying for a residential mortgage anyway - as what you are essentially seeking is commerical finance for a business venture (semi commercial in this case, as there is to be both a residential and commercial aspect to the same unit).

You need to sit down with a commerical mortgage broker (there WILL be a fee), or float it past your own bankers first to see what the general feel of the proposition its (before you incur any broker fees), then if its a go'er with your business type, submitted business plan, experience etc, you may want to use a broker to see if they can beat the rate offered by the bank (which will be SVR & a loading - circa 1.5 - 2.5% for semi commerical borrowing, with an absolute minimum deposit of 25% - possibly higher in reflection of the nature of the business/experience).

If this is a start up however (ie no previous experience/trading) I would go with your bank if they do offer you ... once you have some established trading under your belt, you may then wish to consider changing lenders for a more competitive rate.

Arranging commercial finance can be a laborious task - and a general mge broker may not want to get involved (due to experience or the time taken in placing such business), so as I say I would recommend starting with your own bankers first (which should be a fee free appointment), just to get a feel for how the market will view the venture, they already having a relationship with you may also have a positive impact on your enquiry.

Hope this helps .. and good luck !

Holly