can you arrange a mortgage before the 'must own for 6mths' period expires?

bettyboo99

Hi,
We would be really grateful for any advice on this....

We have bought a property that we need to renovate before we can use it for both living in and running a new business from. We would like to raise money for refurbishment through a small mortgage of about 30% LTV but have run up against a hurdle we didnt anticipate; apparently you can only have a mortgage either when you first buy a property OR after 6mths of ownership (anyone know why?) Unfortunately this will seriously delay our business start up so we wondered if anybody here knows if lenders will agree a mortgage in advance so that it releases the money the moment the 6mth point is reached? (it might be that we could then at least plan the building work to complete at the 6mth point, safe in the knowledge that we can pay the builder ...something Im sure he'd appreciate!)

Thank you in advance!

kingstreet

Some lenders don't apply the "six month rule" so a chat to a whole market broker would probably yield the results you need.

Dave_Ham

You need to be very careful when mixing new mortgage with the intention to start/run a business from home.

There are 6-7 lenders that do not have the 6 month rule, although most only lend to a maximum valuation at the purchase price you paid.

All the best

GMS

What type of business are you looking to run from the property?

Do you have an income at present?

bettyboo99

Hi,
thanks for replies. The property was previously a shop plus flat and we are reinstating the shop as bookshop and very small cafe. The mortgage isnt for the business part but to increase the living space by extending into basement. Dont know if that helps at all.

ACG

You need to speak to a broker, your not going to get a high street lender to do a mortgage on part resi/part commercial no matter what part of the building the money is for.

bettyboo99

Oh dear ACG thats worrying, we were advised that so long as the business was less than 30% of total property it would be ok, even for high st lenders like Halifax. Alternatively we could possibly split the deeds into two separate properties and remortgage only on the residential part. I think the loan would then equate to around 50% of purchased value or 25% of post renovation work value. I cant believe how problematic this has all been as there is no risk to lenders given that we have put down a massive deposit and the mortgage is easily affordable....so frustrating.

ACG

I dont want to come across as rude but did you not do the research on this before you purchased it? Who advised you it would be ok? Im assuming the vendor or agent? The EA works for the vendor not the buyer.

EDIT:
I have edited this as i have just looked into it a little bit. It could actually be possible but with high street lenders it looks very much hit and miss. Some seem to be prepared to consider it subject to valuers comments, others are an outright decline.

Edit part 2:
Sorry for the constant changes, i have never done a flat/shop on the same deeds as a mortgage so ive been doing some reading....

As above the odd lender will consider it based on valuers comments. However, with the property being under 6 months since purchase AND a cafe downstairs i think you will struggle to get a residential mortgage on this and commercial is probably the best way forward.

I think a broker is the best way forward though as they can do the research and hopefully find a lender for you. They can also help to determine whether its cheaper to split the deeds or just mortgage it on a commercial basis... or even a bridging loan followed by a different mortgage. There are options but i dont think a high street lender is one of them.

bettyboo99

Hi ACG,
Dont worry didnt seem rude, (just glad for any help/pointers!) we did attempt to research this quite extensively between internet and talking to 3 IFAs all of whom ended up suggesting different things. The initial roadblock was that we couldnt get a mortgage to purchase because the residential providers didnt like the commercial and the commercial ones didnt like the residential. So the first priority was to scrape together everything we could and buy outright with cash so that at least we were in. We are now in a position of having around 250K of equity (plus Im in secure professional employment) and we just want to raise around 50K...it didnt seem such a big thing to aim for but we're hitting barriers at every turn. So how does one find a good broker then?

GMS

bettyboo99 wrote: »

. The initial roadblock was that we couldnt get a mortgage to purchase because the residential providers didnt like the commercial and the commercial ones didnt like the residential. So the first priority was to scrape together everything we could and buy outright with cash so that at least we were in.

This should have sounded the alarm bells. Not being able to secure the finance initially would mean similar issues later on.

Did you borrow any money to purchase?

Definitely one for a broker. Rates will not be high street though

bettyboo99

We were fortunate in not having to borrow to make the purchase thankfully and the property itself was a really good buy even if we did nothing to it. One starts to wonder how any businesses ever get off the ground these days! Quite demoralising.