How to mortgage a property while still being able to develop it.

jsl4444

Hi

Hopefully someone can give me some guidance. I have spoken to a few lawyers, a financial advisor and an architect and I am still to find a solution.

Around 8 months ago I inherited a property and now live in it, everything is in one title and is fully in my name. It is a largish garden of around 3 acres and comprises of:
1. main house and garden
2. some out buildings clearly away from the main house suitable for conversion into holiday lets
3. some land clearly away from the main house which could be a plot or a house.

The plan is in the next 12 months of so, to start converting the outbuildings with a view to renting as holiday accommodation. Then in the next 24 months build a house on the plot and either sell or move into ourselves and sell the main house.

The problem is I need to take out a mortgage for about half the value of the main house in order to pay off the balance of the inheritance to my sister.

I have been told by my financial advisor that if I take out a mortgage on the whole title and then plan to 'develop' the other buildings / plots. There is every chance the mortgage company will refuse to let me do this.

So the finance advisor is saying I need to split the titles and then take a mortgage out on just the main house/garden area and then I am free to do what I want with the other plots.

However both lawyers are saying I do not need to split the title and all I need is an architect to clearly mark up OS maps with a division of what will be pledged to the mortgage company and then the remainder that will be left mortgage free for development. That division I understand will get lodged with the land register at the time of taking the mortgage. I struggle to see why a lender would sign up to this as surely they want their title protected and while it is all in one title, albeit with a marked off area mortgaged, I don't see why they would agree to it.

I am at the point of not really knowing what to do and any advice would be much appreciated. The urgency is in securing the lending on the main house while trying not to jeopardise being able to commence the future developments and potentially borrow on them.

Thanks in advance

J

G6JNS

jsl4444 wrote: »

Hi

Hopefully someone can give me some guidance. I have spoken to a few lawyers, a financial advisor and an architect and I am still to find a solution.

Around 8 months ago I inherited a property and now live in it, everything is in one title and is fully in my name. It is a largish garden of around 3 acres and comprises of:
1. main house and garden
2. some out buildings clearly away from the main house suitable for conversion into holiday lets
3. some land clearly away from the main house which could be a plot or a house.

The plan is in the next 12 months of so, to start converting the outbuildings with a view to renting as holiday accommodation. Then in the next 24 months build a house on the plot and either sell or move into ourselves and sell the main house.

The problem is I need to take out a mortgage for about half the value of the main house in order to pay off the balance of the inheritance to my sister.

I have been told by my financial advisor that if I take out a mortgage on the whole title and then plan to 'develop' the other buildings / plots. There is every chance the mortgage company will refuse to let me do this.

So the finance advisor is saying I need to split the titles and then take a mortgage out on just the main house/garden area and then I am free to do what I want with the other plots.

However both lawyers are saying I do not need to split the title and all I need is an architect to clearly mark up OS maps with a division of what will be pledged to the mortgage company and then the remainder that will be left mortgage free for development. That division I understand will get lodged with the land register at the time of taking the mortgage. I struggle to see why a lender would sign up to this as surely they want their title protected and while it is all in one title, albeit with a marked off area mortgaged, I don't see why they would agree to it.

I am at the point of not really knowing what to do and any advice would be much appreciated. The urgency is in securing the lending on the main house while trying not to jeopardise being able to commence the future developments and potentially borrow on them.

Thanks in advance

J

You are probably putting the horse before the cart! You would be in a much stronger position if you start by applying for planning permission. That will increase the value of the property and make getting finance much easier.

betmunch

Ask the Lawyers which lender will accept such an arrangement if they are so sure.

It sounds to me like they have the legal solution but havent considered if a lender will actually lend.

Has your mortgage broker considered commercial lending? I cant think of a residential lender that would consider this of the top of my head.

Doesnt mean there isnt one, just that on a saturday morning and without doing a fair but of research nothing comes to mind!

jsl4444

Thank you both for your ideas. I will speak to lawyer and fin advisor to see if what they are proposing is actually feasible.

I would go down the planning permission route, but that will take some time and I need to realise the money sooner rather than later.

Thrugelmir

jsl4444 wrote: »

I would go down the planning permission route, but that will take some time and I need to realise the money sooner rather than later.

As you are living in the property and therefore appears to be your home. Why not simply obtain a residential mortgage for the time being. Putting everything else on the back burner.

Then you spend as much time as you like formulating longer term plans.

jsl4444

Yes I tend to agree, just take a residential mortgage and do the rest later, the only issue I see with that is that I will not be able to split the land\deeds when there is a mortgage on it. So one way or another I understand I need to clear the lending before making the split later. this is why I was thinking of trying to do it before I tie it up with a mortgage.

Thanks for your input.

g6jns_2

jsl4444 wrote: »

Thank you both for your ideas. I will speak to lawyer and fin advisor to see if what they are proposing is actually feasible.

I would go down the planning permission route, but that will take some time and I need to realise the money sooner rather than later.

Without planning permission finding a lender will be much more difficult.

jsl4444

Im sure your right, planning permission will help with the future lending on the development sites. however my current focus is just how best to borrow on the main house without preventing the future development of the development sites.

Thrugelmir

Why not split the existing house away from the remainder of the plot (i.e. outbuildings and land).

Then remortgage the existing house and repay your sister.

Sell the house , repay the mortgage, then use the remaining equity to fund the development work.

You then be left with a new home and holiday lets.

jsl4444

Thrugelmir - you got it. That is exactly what I want to do.
However this is where I am stuck. I cannot seem to get a lawyer and a broker to agree the way to do it.
The lawyers are saying, keep it all as one title just now, but get plans marked up of the main house which will show what is to be mortgaged while leaving the rest for development later. The lawyers are saying best split the title as late as possible.

The broker is saying that won't work and I need to split the titles and then take the mortgage on the main house which will have its own title.

I am trying to get the lawyer and the broker to speak as I feel stuck in the middle between parties who I thought should know how to do this.

All this time, I am conscious I owe my sister a sum of money so I also want the fastest route, that still allows me the flexibility to develop the sites.

Anyway we shall see... Thanks for your thoughts.

Thrugelmir

Was the title of the property transferred into your name alone. Not in joint names.