Commercial mortgage but property has a residential element

Sheila69

How does this work ?

If I looked at an equestrian commercial property and wished to buy it with a mortgage, how would it having an element of residential accommodation affect any mortgage ?

Thinking of buying it through a SIPP.

holly_hobby

If you will live in it, it may squeeze through on a mixed use/semi comm basis.

Yes possible to hold through a SIPP if full commercial borrowing, with max 75% ltv, of course this will have to satisfy the commercial and UW requirements of your chosen lender (they will look at historical trading and P&L figs and projections, your experience in the sector, business development plan, how much of the pch price represents goodwill, and thats just for starters !).

Of course something as complex as this will require a commercial broker and a fee (due to the work and effort reqd in placing commercial finance through to completion) ... but I'm sure you already know this

Hope this helps

Holly x

Sheila69

holly_hobby wrote: »

If you will live in it, it may squeeze through on a mixed use/semi comm basis.

Yes possible to hold through a SIPP if full commercial borrowing, with max 75% ltv, of course this will have to satisfy the commercial and UW requirements of your chosen lender (they will look at historical trading and P&L figs and projections, your experience in the sector, business development plan, how much of the pch price represents goodwill, and thats just for starters !).

Of course something as complex as this will require a commercial broker and a fee (due to the work and effort reqd in placing commercial finance through to completion) ... but I'm sure you already know this

Hope this helps

Holly x

I understand where you are coming from but do you know how heavily you think we should be greasing the wheels of lenders and intermediaries with fees.

With SIPP borrowing limited to 50% of the fund value, this represents a maximum LTV of 33% and with 200% coverage from day one, it hardly warrants much in the way of fees when there is no goodwill (we are talking property here, not a business) and their interest is so heavily covered.

Some fees yes. Many thousands, no.

holly_hobby

Of course if avoiding prof fees is a priority, rather than prof guidance and placement, then there is absolutely nothing at all preventing you from applying directly to commercial lenders, and you may find (depending on the presentation, figs, and business examination, including the banks review of current trading accounts and your own business plan), that the first lender will accept.

If you wish to try yourself and avoid an initial fee, my suggestion would be to approach your own bankers (if the have a commerical arm) - as they already know you and have an established relationship with you. It will also give you an idea on whether they feel its a viable business proposition, which may differ from your own assessment, and if so what they will be prepared to lend you, on what basis and what they'll require to support the application and underwriting.

If they don't offer commercial finance, or reject on figs (which you feel are sufficient), you may then want to utiise a commercial broker, as trawling the high st looking for commercial finance, won't be any fun, especially in this financial climate - of course this being a commercial enquiry there will be a broker fee for this (unlike with resi brokers whom sometimes elect to waive a fee on a straight case, in place of commission & procuration fee receipt). Commercial broker fees usually stand whether it proceeds through to completion or not, due to the general complexity of placement, packaging & legwork generally reqd - but the assistance and support of an experienced commercial broker, in sourcing the most suitable lender and product may well outweigh any fee incurred.

Hope this helps

Holly

Wh05apk

Not all brokers charge fees, but you should consider if you are getting value for money? if you would rather pay an extra £1,000pa interest to save perhaps a £500 fee that is your concern, but a good broker will place a case like this fairly easily, and also probably get you a better deal than going direct.