Converting 2 properties into one (mortgage implications)

lizziecassmaran

Hi,

I currently live in a property worth circa 100k with circa 65k on the mortgage, in my name.

We would like to buy the flat beneath us and convert the two into a single property.

The flat below is valued at 58k. We've been given a mortgage valuation report giving a combined valuation of £180k (£20k more than the sum of its parts).

We are not looking to borrow money to finance construction just to buy the flat.

Our plan had been to for my partner (as a first time buyer) to buy the flat, hopefully on a 90% LTV, but failing that 85%, convert the two, then get a single mortgage.

However, our mortgage company (for the one we already own) have said that they wouldn't allow that, because it 'wouldn't work with the titles'.

People do do this - how? Can we do it?

(Could we add a staircase between the two that is officially 'just an access route' and continue to just pay off 2 mortgages?)

Thanks in advance

davidmcn

lizziecassmaran wrote: »

(Could we add a staircase between the two that is officially 'just an access route' and continue to just pay off 2 mortgages?)

No, because if either lender wants to repossess and sell their flat, how do they explain the stairs leading directly to the neighbours?!

At the very least you'll need the same ownership and lender for both flats, and even then you'll need the lender's consent before doing the work.

Thrugelmir

lizziecassmaran wrote: »

The flat below is valued at 58k. We've been given a mortgage valuation report giving a combined valuation of £180k (£20k more than the sum of its parts).

What's the conversion cost going to be though.

lizziecassmaran

Yes - I guess I was thinking of something with locked doors either side.

Could we get the same lender, get it declared as one property, then do the construction?

lizziecassmaran

The construction costs are being financed separately. I realise this has implications for us as to whether it technically makes it a sound financial decision, but it's not the lender's concern - we'd go from having two properties with 35% and 85% equity, to one property with around 35% equity - we'd become less of a risk.

People do do this - how?

p00hsticks

lizziecassmaran wrote: »

People do do this - how?

pay off the mortgage / pay cash for both properties ....

davidmcn

lizziecassmaran wrote: »

it's not the lender's concern - we'd go from having two properties with 35% and 85% equity, to one property with around 35% equity - we'd become less of a risk.

But until it's complete, you potentially become more of a risk, as the lender may have to repossess a half-finished building project - which is more difficult to sell than just leaving the flats as they were. You'd probably need to look at commercial lending suited for developers rather than ordinary owner-occupier mortgage products.

lizziecassmaran

davidmcn wrote: »

. You'd probably need to look at commercial lending suited for developers rather than ordinary owner-occupier mortgage products.

How do we do that? Who do we even talk to about that?

davidmcn

lizziecassmaran wrote: »

Who do we even talk to about that?

A mortgage broker?

foxy-stoat

Do it properly or not at all, you will have issues with mortgage fraud and possibly insurance fraud as well if the worst happens with the building, you may have issues with the planners as well.

Maybe a broker can give you more advice.

Thrugelmir

lizziecassmaran wrote: »

The construction costs are being financed separately. I realise this has implications for us as to whether it technically makes it a sound financial decision, but it's not the lender's concern -

While there's a mortgage in place the lender is technically the owner of the property not you. Therefore has a vested interest in any work proposed. The interest being protected by very explicit terms in the mortgage contract.