Impossible to get a mortgage because I own the freehold to my flat

vickers

Hi,

I currently have an interest only mortgage at SVR as the fixed rate came to the end last year while I was out of work.

I am now in work so went through the process of finding a new fixed rate interest only mortgage with a whole of market broker popular on this site.

All was going well (we are lucky to have plenty of equity) and a lender was found but then the broker discovered that I own the freehold to my maisonette (and the building) and the other maisonette of the building is leasehold.

As a result I was told that no lender will give me an interest only mortgage as the liability is too risky.

We can't afford a repayment mortgage and are planning to move in a couple of years when we've finished doing the place up so really want another fixed while the rates are still low.

Can anyone offer any advice?

Leon_W

So, you hold the freehold to your own maisonette and that of the only other maisonette in your building ? That is to say you own the whole freehold to the building ?


If that is the case that is not good. The problem is not the interest only/repayment mortgage question it is whether the property is mortgageable at all. I can't think of any mainstream lender that will lend on a freehold maisonette so when it comes to sale time it will be cash buyers only thus reducing the resale value considerably.


Usually in this situation the other maisonette would own the freehold to yours and you would own the freehold to the other. Therefore making both leasehold properties which are easily mortgageable. Not a lawyer but I would be looking to sell your freehold to the other maisonette.


Someone may be along in a bit who can help further. I would also be interested in any other suggestions for this.

vickers

Thanks Leon W. I'm beginning to understand that it's an unusual scenario. Makes me wonder how we got a mortgage in the first place.

Leon_W

There were a few lenders that would lend on a freehold flat ( can we call it a flat as this topic comes up in flat/leasehold queries). This was back at the height of the property boom. Those lenders have all but gone so it is now practically impossible to arrange a mortgage on a freehold flat making yours virtually unsalable.


I would speak to a solicitor and your neighbour as you need your neighbour to own your freehold ! I'm sure you could come to some agreement as he may want his lease extending ??


Once you can grant each other nice long leases your property is then no different from any other leasehold to mortgage.

ACG

There are a few lenders who will lend on a freehold flat, 1 of which is a high street lender.

Whether they would lend on a freehold maisonette is another matter.

Unfortunately i cant point you in the direction of certain lenders as it could be seen as leading but if your broker wants to PM me im happy to send them the list i have to investigate on your behalf.

EDIT: I also dont know whether any of those lenders will do Interest only, 1 or 2 of them may but im not sure.

Leon_W

Apart from NatWest who will lend on freehold flats, you are getting into uncharted water.


The problem is this. What if Natwest stop doing freehold flats ? Your property is practically cash purchase only. I would try and get a more permanent solution.

ACG

The issue is there no matter which lender they are with. That should not stop them trying to get the best deal they can at the minute. It might be staying where they are but it does no harm to look elsewhere.

TrickyDicky101

Couldn't the OP grant himself a lease over his maisonette? Since he owns the freehold to the entire property I presume it must be possible (I assume this would involve some form of legal fees).

Senior_Paper_Monitor

There are three lenders who come to mind that might consider - the maisonette issue may prevent all/some of these.


An option is to create the leasehold on your flat and simultaneously sell (may be for peanuts) a share in freehold to the other unit and then you both have standard shared freehold independent leasehold status and should be able to go forward.


There is probably around a grand's worth of fees involved somewhere in the process.


As Leon W indicates there are ways to sweeten this for the other party - all depends on the detail.


A grand or even considerably more may be peanuts compared with the increase in value of your unit 'as is' because it will be near un-saleable under current structure.

vickers

Thank you all for the advice.

I shall look into creating a share of the freehold with the other flat who is on a long lease already (but if I have to give it away to forward my cause then that's no bad thing) and hope it doesn't cost the earth.

Thank you all again. The time you give imparting advice to help others is very much appreciated!

kingstreet

Does your property remain leasehold?

You can own the freehold of the building, but your flat remain leasehold. That would be the usual form of ownership in such circumstances, to avoid what is happening here.

You owning the freehold does not make your flat freehold.

More here;-

https://forums.moneysavingexpert.com/discussion/4917957