Need advice on buying a second house directly behind us and making into 1 house by knocking through

sonnhan67

Me and the wife have been looking for a new house with a bit more space but nothing has come up that we like until now. We are in a back to back property and our neighbours behind are thinking of selling and have asked us if we would be interested in buying, so we could make the two properties into one.

We just wanted a bit of advice on what our options are in securing a mortgage for the house behind. Would we need to have a new combined mortgage to cover both properties, or would we need to have a mortgage for the back property in addition to the mortgage we currently have (so, in essence, two mortgages).

Our intentions would be to buy the house behind and knock through to make one large property, but due to the cost of this work it may not happen straight away.

If we did buy the property, we may also need to rent it out for a short period initially, until we have saved enough money to pay for the internal knock-through work.

We have £77,000 left on our mortgage, and the neighbours have self-valued their property (based on previous property sales on the terrace) at £130,000 to £140,000.
We believe their property is worth no more than £125,000 to £130,000 maximum, so we would be expecting to haggle somewhat.
I realise there are a lot of questions here, but any help or guidance would be greatly appreciated!

davidmcn

You'd need some form of development finance while you do the work, rather than a conventional mortgage - normal lenders won't want to risk repossessing a building site (or half a house). Bear in mind for stamp duty purposes you'd be buying an additional property so it would attract the surcharge. Not sure what the planning position is likely to be but obviously you'd need to check that out before committing yourselves.

Slithery

No point even thinking about mortgages until you know whether or not you're likely to get planning permission to knock-through.

Also bear in mind that the combined property will probably be worth a lot less than the sum of its parts.

AnotherJoe

Take out an equity loan on your current property, go into the bank, take it out as cash and set fire to it. Because that's what you'd be doing with this plan. Saves all the hassle with permission, builders. Etc. 

I susoect it's a complete non starter anyway due to planning permission and the lender being unwilling to go along with you reducing the value of the property they loaned you money on.

SpiderLegs

AnotherJoe said:

Take out an equity loan on your current property, go into the bank, take it out as cash and set fire to it. Because that's what you'd be doing with this plan. Saves all the hassle with permission, builders. Etc. 

I susoect it's a complete non starter anyway due to planning permission and the lender being unwilling to go along with you reducing the value of the property they loaned you money on.

Sounds like a fair assessment to me. 

stig

Don’t forget when you buy the second house you’ll pay the stamp duty second home 3% surcharge and if you don’t dispose of your current property then you can’t claim this back - knocking into one doesn’t count.

GDB2222

AnotherJoe said:

Take out an equity loan on your current property, go into the bank, take it out as cash and set fire to it. Because that's what you'd be doing with this plan. Saves all the hassle with permission, builders. Etc. 

I susoect it's a complete non starter anyway due to planning permission and the lender being unwilling to go along with you reducing the value of the property they loaned you money on.

I imagine the point you are making is that the OP is going to start with two houses, each worth say £130k, so £260k in total. He'll then spend say £50k knocking them into one big house. So, he needs the end product to be worth at least £310k.

But it will be in a road with houses worth £130k , so even though it's going to be twice as big and really lovely inside nobody is going to offer anything like £310k for it. Even if they were to, it will be savagely down-valued for mortgage purposes. 

sonnhan67

This is really helpful information, I appreciate it. I think you've helped us make the decision here! Thanks davidmcn Slithery AnotherJoe SpiderLegs stig GDB2222

MalMonroe

GDB2222 said:

AnotherJoe said:

Take out an equity loan on your current property, go into the bank, take it out as cash and set fire to it. Because that's what you'd be doing with this plan. Saves all the hassle with permission, builders. Etc. 

I susoect it's a complete non starter anyway due to planning permission and the lender being unwilling to go along with you reducing the value of the property they loaned you money on.

I imagine the point you are making is that the OP is going to start with two houses, each worth say £130k, so £260k in total. He'll then spend say £50k knocking them into one big house. So, he needs the end product to be worth at least £310k.

But it will be in a road with houses worth £130k , so even though it's going to be twice as big and really lovely inside nobody is going to offer anything like £310k for it. Even if they were to, it will be savagely down-valued for mortgage purposes. 

I agree. You may be better off just waiting until you can buy something else that's bigger anyway. Knocking two houses into one sounds like a good idea (I used to fancy doing it myself) but when you start working out the costs, not to mention you'd have to get planning permission, and there'll be all the mess and inconvenience and the fact that mortgage lenders might not want to invest in such a property, it seems like one big nightmare. 

Plus, if you were to buy the other property and put tenants in it in the interim period, that could also create more problems since not all tenants are reliable and trustworthy.

The whole thing sounds like a major project that you could come to regret.

ouraggie

While it remains as two properties you will also have to pay two lots of council tax.

GaleSF63

Have any other back-to-backs nearby been combined?