Release equity to buy upstairs flat and turn into a house

mimosalady

Hi

I'd appreciate any help in regard to this issue please!

I own a flat which has gone up in value and I would like to release some equity so to buy the upstairs flat and turn it back into a house, (to live in, not rent out).

If it helps to know values I have a mortgage of £192k, it was valued last week between £550-575k and the property I would like to buy is £350k. SO in theory enough equity to buy upstairs outright but....

I called the bank and they said no, because of the loan to value issue, although when it's turned back into a house (which would not take a lot of work) it would be work over £1m. The reason I say this is because then the LTV would be fine, right?!

How can I do this?!

Thank you all for reading and any advice you can share.

holly_hobby

The first thing to establish is if the local authority would permit the change of use and provide planning permission - without this the plan falls at the 1st hurdle.

The fact it was once a single dwelling will help - but isn't a prequel to them agreeing - so thats the 1st thing to sound out.

Next, the 2 flats will be held under 2 separate title deeds (which must be the case or you wouldn't have been able to obtain a mortgage on your own flat). And this is a main problem, as even if you pch upstairs for cash, whilst in the midst of developing the property back into a single dwelling, there is going to be building works that will affect the value of your flat before completion - and whether your lender would provide the finance on this basis is an issue, given that if you don't complete the works, and then flat is the subject of a possession order, it could be worth a lot less than it is now, and only be suitable to cash purchasers, which rather narrows the market for a good re-sale price. Additionally, if they do agree, once the conversion has taken place your mortgage will probably have to be closed down, to take account of the new title deed, and a new mge on the single dwelling effected - which would essentially be a remortgage app (given that you will own both independently) and then we're into establishing LTV waters, of which there is not gte of suitability on independent lenders survey results.

To that end if may be worth exploring a remortgage under a development/refurb finance - the likes of buildstore would provide guidance http://www.buildstore.co.uk/ ... to which if the rates are juicy, you could look to revert back to a traditional residential mge post works completion and title amendment (ie changing the unit from 2 titles to 1), and removal of 2nd kitchen.

I would recommend a self build experienced mortgage broker, whom will be more familiar with how this needs to be marketed and which lenders will be the most receptive to the exercise.

This will be a costly exercise, so do ensure that the realistic resale figs for it as a single dwelling, will make the hassel and initial outlay worthwhile.

Hope this helps

Holly

mimosalady

Thanks Holly

That's helpful...I'd best do some more research!

Thrugelmir

mimosalady wrote: »

I called the bank and they said no, because of the loan to value issue, although when it's turned back into a house (which would not take a lot of work) it would be work over £1m.

Component parts are often worth more individually than the whole.