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Mortgage repayment

edited 13 October 2018 at 9:40PM in House Buying, Renting & Selling
6 replies 682 views
MrjohndowMrjohndow Forumite
9 posts
edited 13 October 2018 at 9:40PM in House Buying, Renting & Selling
I own a freehold house that has been converted into THREE FLATS with planning permission granted by my local council.

I currently have a BUY TO LET mortgage (SANTANDER) and a SECOND CHARGE (ALDERMORE) on the property that were granted prior to the conversion

If I were to sell ONE of the flats the proceeds from sale shall cover the costs and repay the BUY TO LET mortgage in full, leaving me with an OUTSTANDING balance owed to the SECOND CHARGE (ALDERMORE).

What would happen to the balance owed to the SECOND CHARGE (ALDERMORE)?

Would they allow me to port the outstanding balance over to the remaining TWO FLATS?

Would they become the FIRST CHARGE?

Please help!! And thank you in advance

Replies

  • ACGACG Forumite
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    I think your caps lock button is faulty...

    Presumably all 3 flats are currently on 1 title deed.
    The 3 flats would need splitting to their own title deeds I think. I am not sure how it would work in practice however as to get a second Charge (in this case Aldermore) there needs to be a first charge which would not exist once Santander are paid off. But as you already have the loan, they may be happy to switch their charge to either one of the properties or a floating charge over both.

    You would need to speak to Aldermore I think.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • davidmcndavidmcn Forumite
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    Mrjohndow wrote: »
    Would they allow me to port the outstanding balance over to the remaining TWO FLATS?
    They MIGHT. They MIGHT NOT. You would need to ASK THEM.
    Would they become the FIRST CHARGE?
    If they become the only charge then YES.

    You would need to bear in mind that there are OTHER THINGS involved in SEPARATING TITLE.
  • edited 13 October 2018 at 9:42PM
    MrjohndowMrjohndow Forumite
    9 posts
    edited 13 October 2018 at 9:42PM
    ACG wrote: »
    I think your caps lock button is faulty...

    Presumably all 3 flats are currently on 1 title deed.
    The 3 flats would need splitting to their own title deeds I think. I am not sure how it would work in practice however as to get a second Charge (in this case Aldermore) there needs to be a first charge which would not exist once Santander are paid off. But as you already have the loan, they may be happy to switch their charge to either one of the properties or a floating charge over both.

    You would need to speak to Aldermore I think.

    Thank you ACG,

    Yes all 3 flats are under 1 title deed.

    I did intend on asking permission from Santander to split the title, creating 3 leases as you've mentioned and eventually sell each flat individually.

    My concern with that was If Santander were to decline my request to split title, due to breach of contract i.e (not asking permission from themselves to convert property in multiple units)
    what the repercussions would be.

    I assume they would either:

    A. Agree to split title

    or B. Decline and request money back

    To save myself from having to find out I thought If I sell one flat to repay and cover Santanders mortgage, Aldermore may allow me to port their balance over as you've mentioned to the remaining 2 flats if new title deeds are created .
  • G_MG_M PPR Forumite
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    I would have thought the PP and CONVERSION would have needed the lenders' permissions - though I might BE wrong.


    Certainly, to sell one flat you would need that flat to have its own Title, and you would also need the lenders' permissions.


    In granting permission (assuming they did) Aldermore would inform you of their condiion(s) - eg tansferring the Charge onto the other flat(s).
    ** If I include a blue link in my post, click and read it before posting a follow-up question. The answer may be in the link! **
  • eddddyeddddy Forumite
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    The lenders would regard property development (i.e. conversion into flats) as much higher risk than BTL.

    For example, because you might rip out the kitchen and bathroom, knock holes in walls and ceilings - then run out of money.

    Then they're left with a 'wreck' to repossess - which is worth less than the mortgages. For that reason, I think they're unlikely to give you consent to do the conversion.

    To do things legitimately, you'd need to find development finance - which will be difficult, and more expensive.


    I guess you could do the conversions without telling the lenders (but that's probably breaching the terms of the mortgages), but you'd have to sort finance out before splitting the titles.
  • eddddy wrote: »
    The lenders would regard property development (i.e. conversion into flats) as much higher risk than BTL.

    For example, because you might rip out the kitchen and bathroom, knock holes in walls and ceilings - then run out of money.

    Then they're left with a 'wreck' to repossess - which is worth less than the mortgages. For that reason, I think they're unlikely to give you consent to do the conversion.


    To do things legitimately, you'd need to find development finance - which will be difficult, and more expensive.


    I guess you could do the conversions without telling the lenders (but that's probably breaching the terms of the mortgages), but you'd have to sort finance out before splitting the titles.

    The house was converted into 3 flats 5 years ago and been let independently ever since, so I guess they may look at it a little differently I hope.
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