Commercial mortgage questions

secondtoughest

edit as no longer need info

Let_Us_See

Easier to pay the fee than receive incomplete or wrong advice.

holly_hobby

secondtoughest wrote: »

A couple of questions:

1. What is the difference between a commercial mortgage and a BTL mortgage in this instance?

A BTL mortgage IS strictly a commercial mortgage - albeit it is technically a semi-commerical arrangement.

The difference between a commercial mge and a semi-comm mge, is essentially the security and interest rate - full commercial (ie shops/office/industrial space) is SVR & a loading (typically 2%+). Whilst semi-commerical (ie where there is a residential element) has a lower loading, but in todays market, since the introduction of the BTL mortgage (as a result of ARLA), they are now more mainstream, and you can obtain structured products such as discount/tracker/fixed rates - as oppossed to a straight SVR loading as previously available.

secondtoughest wrote: »

2. Can the commercial mortgage be changed into a BTL mortgage, as it is being rented? Is this likely to produce a better interest rate?

Of course, you remortgage to a BTL lender.

There are a few that don't have min income requirements, but the unit must be self sufficient, determiend by the rental income being at least equal to 125% of mge interest @ typically 6%.

Max ltv as an exeperienced landlord circa 80%.

secondtoughest wrote: »

3. Can the mortgages be combined into one residential mortgage so she is borrowing it all against the flat? Would this likely acheive a better interest rate? The LTV would currently be 83.16%, however this could potentially be reduced slightly with overpayments if this will achieve a better rate.

Yes she could do that (ie equity release on her own home to repay the commerical mge), but the mge (as a residential arrangment) will of course be based on her earned income, as oppossed to rental income as with a BTL arrangement (unless she is a professional landlord ie manages a portfolio, with full accounts)

secondtoughest wrote: »

She is willing to use the broker who got her the initial mortgages, however he charges a fee.

Thanks for your help

There will also be alternative brokers whom don't charge a fee, and are happy to work from commission (from related product sales) and mge procuration fees (for fairly straight forward placement cases) - the important aspect is to obtain an experienced whole of market broker (whom will will allow access to intermediary only products/lenders), to which if there is a broker fee may be offset against BTL income as associated professional expenditure.

Hope this helps

Holly

secondtoughest

Of course, you remortgage to a BTL lender.

There are a few that don't have min income requirements, but the unit must be self sufficient, determiend by the rental income being at least equal to 125% of mge interest @ typically 6%.

How do I work this out? The rental income is £750, and the mortgage payments are £495 (interest only on £96,000 at 6%)

3. Can the mortgages be combined into one residential mortgage so she is borrowing it all against the flat? Would this likely acheive a better interest rate? The LTV would currently be 83.16%, however this could potentially be reduced slightly with overpayments if this will achieve a better rate.

Yes she could do that, but the mge will be based on earned income, as oppossed to her rental income (unless she is a professional landlord ie manages a portfolio )

I see! So the rental income she recieves from myself, our flatmate and her rented property can't be classed as 'income/earnings' towards a residential mortgage? As this is over £1500 a month.

It may be better to go into a short term fix with the commercial mortgage until she qualifies as this will mean more of her income will be through wages.

Thanks for your advice, it's really helpful.

Dave_Ham

You need specific answers on this to your specific circumstances, as some of the assumptions provided are not absolute.

For example, some lenders do not have minimum incomes for buy to lets, some do not necessarily apply the 125% at 6%, some do accept income from you, lodger etc. if she has declared it and paid tax on it and many other variables.

The property itself is also a consideration not noted here, whilst you have been provided with good information it does not always directly apply to your situation and you may have alternative options.

Have a chat with your existing broker or another, most will probably provide the solution for free and you typically only pay if you go ahead with that solution.

All the best