Mortgage for shop and flat premises

martwise

Hi all,

Just a quick query i rent out shop/flat premises and have decided to try and raise some funding for a new build project. I have 2 of the above properties freehold and mortgage free combined value £300,000 rental yield £17,000 per annum.

My usual finance route was raising the money through equity on my home but now would like to transfer this to the rental property struggling to find reputeble lenders who accept the shop flat mix, any ideas would be helpful.

Thanks

MortgagesInc

With some lenders it depends on the square footage of the shop against the residential part - what is the spilt?

AndrewSmith

It depends on a number of things.

The type of property, the business type, the conditions of both the Assured Shorthold tennancy for the flat, and the Commercial Lease for the shop below etc etc.

With respect to the split of residential / commercial. If the residential portion of the building as a whole is more than 75% of the overall property then you will be able to look at a residential mortgage or buy to let. If not then you will be looking at a commercial mortgage, which carries it's own set of conditions and criteria.

Commercial mortgages tend to me more bespoke than a residential package with each deal being 'tailored' to the individual proposal being made.

Where possible it is adviseable to stay below 75% loan to value to open up the more traditional high street lenders to you.

Also, most commercial mortgages tend to be shorter term than residential, the longest usualy being 15 years, and the vast majority are on a capital and interest basis.

If looking at over 75% loan to value then you may find yourself looking at specialist commercial lenders. They can offer such things as 3 years interest only at the beginning and more flexible underwriting terms, however you do pay for this in the interest rate offered.

On either option you should be expecting to pay somewhere to the order of 7-7.5% plus. This does however obviously depend on the individual proposal being offered and it is impossible to be accurate with this.

Hope this helps

Andrew

toonfish

I have done these by splitting the titles to the shop and flat - involves a bit of legal work but you can then get standard buy-to-let deals on the flats (providing it's not a kebab shop or similar) and just raise commercial finance (bigger deposit, higher rate) on the shop elemnt if you need it.

martwise

Many thanks to all,
the split is 65% residential out of the £300,000 would like to raise 200,000, not to unhappy with 7% to 7.5% have been up in the heady days of 14/15% who should i be talking too?
Cheers

AndrewSmith

martwise wrote: »

Many thanks to all,
the split is 65% residential out of the £300,000 would like to raise 200,000, not to unhappy with 7% to 7.5% have been up in the heady days of 14/15% who should i be talking too?
Cheers

Impossible to say without knowing all the information. With that loan to value though I would think you should be looking and mainstream lenders.

Hope that helps

Andrew

Conrad

All the main Banks - you might find you end up dealing with a resi mortgage and a separate commercial department within the same lender, that will fun!

I found HSBC to be quick and easy. Your own business Bank if you have one.
I generally get 3 quotes and then go back to HSBC for a 'deal'. Last time they reduced the commericla rate by 1%! and the fees were reduced.

To be honest what you are trying to do may end up being pretty stressful, there are just so many ifs and buts, for example; the resi B2L lending department may be detterred where the commercial property shares a door or drive - thats just one of hundreds of things I could mention.

In other words allow at least 4 months.