95% LTV Mortgage on 2 x Flats

RhysRegan89

Hello, first time poster - loving the advice picked up so far!


I have a question in regards to 95% LTV Mortgages.


I am interested in a property which is currently split into 2 self-contained flats (but it is marketed as a 3 bed terraced). It is on the market for £140,000.


I have £9000 in savings and am hoping to get a 95% LTV (I have an excellent credit score and salary easily covers mortgage repayments). Currently paying £575 p/month rent, mortgage will only be c.£600 p/month.


Plan:
Buy the house, fully renovate, sell first floor flat, keep ground floor flat to live in.


Questions RE: 95% LTV:
- Will the bank flag up that this is 2 x Flats?
- Will they have an issue with me planning to sell the first floor flat?
- Should I say I plan to turn back into 3 bed house to increase my chances of acceptance?


General questions:
- I am buying with my partner who is from Italy, she has been living in the UK for the last 12 months, online I saw they want EU nationals living in the the UK for 2 years prior to getting a mortgage. Does this change as she will be buying with me? (UK citizen)


I have a meeting with the bank arranged Tuesday - just looking to see if anyone has any advice/guidance to improve my chances of getting this 95% LTV.


Thanks !
:beer:

cahillg81

RhysRegan89 wrote: »

Questions RE: 95% LTV:
- Will the bank flag up that this is 2 x Flats?
- Will they have an issue with me planning to sell the first floor flat?
- Should I say I plan to turn back into 3 bed house to increase my chances of acceptance?


General questions:
- I am buying with my partner who is from Italy, she has been living in the UK for the last 12 months, online I saw they want EU nationals living in the the UK for 2 years prior to getting a mortgage. Does this change as she will be buying with me? (UK citizen)


:beer:

1 - Yes they will as they will have it valued.
2 - Yes, unless it's on a split title deed, I suspect this is not the case. From information you have provided.
3 - It won't make much difference, they will assess it on the existing security.

The last part it will make no difference that she is buying with you, some lenders insist on 3 years address history. There are one of two I think who may do it with 12 months.


Are you a First Time Buyer? If so I'd probably stay away from this, and if you were to pursue it speak to a broker who can give you more options than a bank.

RhysRegan89

I am technically a first time buyer though have previously renovated a property for profit with some friends - I was equal partner but not on the mortgage due to identity fraud ruining my credit score a few years ago.


Why would you advise a first time buyer to avoid?


Thanks for the advice - seems like I should be upfront with my plans. Will still go to see the bank and look to arrange a meeting with a broker later this week.

amnblog

Be careful here Rhys.


You can waste time and money on a fruitless exercise.


Lenders are not interested in this type of arrangement at 95% loan to value.


They may lend you 95% to buy a home, but not to finance property development for profit.


I would recommend you talk to the broker first and don't waste your time with the Bank appointment.

ACG

Unless the vendor converts it back to a house before the survey is carried out, I would walk away. I cant see you being able to get a 95% mortgage on it.

RhysRegan89

Thanks for the advice. I will arrange an appointment with a broker and update with what they advise.


This was my rational to the lending:


That it is less risky for a bank to lend on a property which requires an aesthetic renovation (no structural work required) as value is pretty much guaranteed to be added (positive equity). I would have thought my position to be even more favourable by looking to sell half the property which would mean I could pay a substantial portion of the mortgage off in a lump sum payment.


If they were to lend me 95% LTV on a £140k new build/RTG property and house prices were to drop I could be left in a position of negative equity = more risk for the lender?


I am now assuming my above thinking is incorrect and that the property in question is considered a greater risk than a RTG property?

ACG

What is an RTG property?

Lenders are not interested in properties that need renovation work, whether cosmetic or structural. They lend based on homes as they are today (although they will take in to account potential negative factors). What happens if you stop paying tomorrow? They have 95% on a property that they are unlikely to ever see the full amount back. If you tell them you plan to split the deeds and sell half off they are never in a million sundays going to lend you the money.

This is specialist finance you need in order to get it to a state where a normal lender would be happy to lend. But at 95% that is not going to happen.

MortgageMamma

More like 60-75%