Whether or not to use a broker?

brizza

Hello all,

Would appreciate some advice from the great and good on MSE...

Myself and my long-term girlfriend are first time buyers and looking at arranging our first mortgage.

We have found a property which we like, but given its location above commercial property, I am wondering whether there is a benefit to using an independent broker.

Our situation -

Total income £125k
Property price - circa £450k
Deposit - 10%

From what I've discussed so far, I am comfortable that in a normal purchase situation that we'd be fine to get a mortgage towards £600k, and I think we'd be happy to deal with the applications on our own without involving a broker (we're both accountants and relatively savvy in that regard).

But with a slightly unusual location of the property, is it worth going through a broker...?

My thought process is that the £1,500 or so I'd pay may not provide value in a normal situation, but with the complication of some lenders presumably being uncomfortable lending above/next to commercial property, the money paid would be well spent.

And I guess the obvious follow on point is that if it's worth going through a broker, then how would you recommend finding one (We're London based, as you've probably guessed from the numbers involved).

Thanks.

GMS

Flat above commercial will not be easy, especially at 90% LTV.

May well be worth a broker to see if it can be done.

What is the commercial property?

Dave_Ham

GMS is spot on, the type of commerical premises will be absolutely key.

Having done many of these, the part of London will also be factored in, as is how many floors above the commercial unit and the location itself.

I would say broker on this one, just due to the commercial element.

Also worth noting given you are accountants, more and more lenders are working off SA302's - so may be worth ensuring these can be to hand.

All the best

brizza

Thanks both - it's an Italian restaurant. The building is split with the restaurant taking up the front half of the building, and the residential property being the rest of the ground floor behind the restaurant and also the 1st floor. All owned by the restaurant owner, he's looking to sell the residential part which is current used by employees of the restaurant.

We're both employed, rather than self-employed, so the SA302 shouldn't apply to us (so long as my Googling of what it is is correct)

If it is feasible to get a mortgage, is my rough £1,500 estimate for broker fees about right, or will it increase depending on the difficulty of negotiations with the mortgage lenders?

Leon_W

Walk away.

Restaurants are a complete no go area for most lenders. The problem is this, you may find a little niche lender who will do it (although I think this unlikely at that LTV) , suddenly the only lender that could do it leaves the market and then you are left with a very expensive unmortgagable property which you could only sell to cash buyers at a greatly reduced valuation.

Find something more mainstream.

Dave_Ham

I think this is incredibly unlikely I am afraid, especially if it is newly converted and you would be the first to own in the current state.

Lenders hate this sort of share. You would get a broker for that sort of money for sure, but 90% of us only charge a fee based upon success and therefore with success limited I think you may struggle to get one to take on the case.

You will need to find some pretty powerful supporting details and I would suggest best you will get will be at subject to surveyors comments and therefore you have a valuation fee at risk...

Be interested how you get on, but as Leon says walking away may be the prudent approach.

Forget the SA302's, I assumed your were self employed accountants or directors.

Good luck

GMS

Any property above commercial will be restricted in terms of LTV usually.

However any lending would be subject to valuers comments which can vary massively.

A flat above a restaurant would often be seen as undesirable, difficult to sell etc. That said a flat above The Ivy (for example) could be seen as desirable whilst an identical flat above a pizza restaurant would be seen as a no no.

Even if you bought a flat above an antique shop which was viewed as desirable there is nothing to say that in 3 years time the antique shop becomes a convenience store and ruins all desirability.

You need to consider very carefully that if you are restricted to lenders and LTV then it is likely any future buyer will be meaning you could struggle to ever move on.

If you really want to have a go at this flat then do instruct a broker. The legwork would be done for you but I suspect it will come to nothing.

brizza

Very interesting, thank you both. To be honest, I hadn't thought it would be so much of an issue - certainly the thought of having an unmortgageable property is frightening.

It's interesting, because this is in a very good area of South West London, and a significant number of the properties in the area have a similar set up with residential above shops and restaurants, but I guess not all will have low LTVs and many will have been purchased in easier times for lending.

Thanks, I'll bear all of this in mind and proceed with extreme caution.