Mortgage for property with holiday let

Terrapinarium

I put this post on the Home buying section, but not sure if I should have posted it here instead...

Hi,

My in-laws want to take out a small mortgage on their property and use the money to help me and my wife get onto the property ladder. They own their house outright, and the mortgage would be for about 10% of its value. However, in a separate building to the main house is a garage with a small flat above it. They have been slowly doing this flat up and intend to let it as a holiday home in the near future.

Because of this intention, it seems the usual mortgage providers will not lend - they initially tried Natwest, and when that was not successful they approached London and Country brokers, who informed them that no one on their books would accept the application.

Does anyone know a way round this? I would have thought it is not that uncommon to want a mortgage when part of the property is being used in this way. I did look at semi-commercial mortgages, but what I have read online seems to suggest that you do not need one if the commercial part of the property is in a different building to the residential part.

Any help anyone can give would be greatly appreciated. It is frustrating that we seem to have hit this barrier when trying to borrow such a small percentage of the value of the property!

Thanks

Beckyy

Would the mortgage be paid off before they intend to start letting the holiday flat? What kind of timescale are they looking at? The fact it's not being let just now means it's not currently a holiday let, just a self contained flat above the garage.


It may be worth talking to a good Independent Financial Advisor, try and find one by recommendation and make sure they're independent and show you whole of market products, one may be able to find something others haven't.

Are you aware that some mortgage lenders can frown upon a 'gifted' deposit when you and your wife come to buy? I don't know enough about it to go into detail but worth doing some research beforehand, it sounds like it might be a lot of hassle for your parents if they have trouble remortgaging. Could they gift you anything without remortgaging or could you save for the deposit over time instead?

kingstreet

I wouldn't have bothered.

Why don't you see if you can use one of the family-assist type products where the lender takes a charge over their property equal to your deposit, in return for giving you a 100% mortgage?

A whole market broker will be able to tell you more...

Terrapinarium

Thanks for the replies.

I expect they will start letting the studio fairly soon - within the next year, so well before the end of the five year proposed mortgage.

I'm not sure how the question is worded, but I guess if it refers to what is happening now, rather than intensions they could just not disclose it, but obviously I don't want to put my in-laws in a position where the bank subsiquently tells them they cannot let it out.

I will have a look into the family assist products, but the ones I have seem before all seem to require a family member putting savings into an account, rather than allowing for a charge over their property. If anyone knows of any particular products that allow this then that would be very helpful?