splitting title & releasing land of New Build on BTL mortgaged land

benebene

Hi all

We built a new property in the garden of our semi-detached house. The house and land are freehold and were mortgaged at that time on a regular residential repayment mortgage.

When the new house was complete we moved into it and wanted to rent out the old house. Thus we remortgaged the whole title (including the land upon which new house built) with a new lender on a BTL mortgage. The lender sent their valuer out and he saw everything (ie. new house, old house) and put in the valuation based on value of the original house (new house was all fenced off and separate by this point). Nobody seemed fazed by the new house being on same title as one being valued for BTL loan.

We got tenants in and everything seemed to be going well.

However we now want to split up the title and 'release' the land upon which the new house is built. I called the lender to see how we might effect this plan and all seemed well until they asked if we actually resided in the new build house - to which this answer is "yes", although I did not admit to this during the conversation. This is because I am concerned that we might be in breach of the BTL loan if we explain that we are living in the new house which has been built on land ostensibly mortgaged under BTL terms. 

So my question is, how do I release the land upon which our family home is now built and lived in without falling foul of this possible issue? The old house alone is easily worth the bank's original valuation on an LTV of 75% so I feel sure that there must be a solution - perhaps involving a further remortgage with another provider? I'd prefer not as we have redemption penalties but if this is the only way then so be it.

Any advice greatly appreciated, thank you for reading.


Ms BB

Doozergirl

You speak to your solicitor.  

They start the process of splitting the title, they will contact your lender who will come and revalue the property without the new build and (hopefully) grant consent. 

Solicitor does the rest with the Land Registry.  

benebene

Thank you so much for the quick response, Doozergirl.

This sounds like a plan - but my concern is the risk of the lender demanding 'payment in full' on our £300k mortgage due to our possibly falling fowl of the BTL T&Cs... if my family lives in the house on land which is mortgaged in this way, are we breaking the law?!

Even considering some bridging finance to pay back the lender, then redraw and release land and then finally remortgage the old house for BTL. That would cost many thousands in bridging interest though. 😢

Ms BB

davidmcn

benebene said:

This sounds like a plan - but my concern is the risk of the lender demanding 'payment in full' on our £300k mortgage due to our possibly falling fowl of the BTL T&Cs... if my family lives in the house on land which is mortgaged in this way, are we breaking the law?!

Why don't you read your mortgage conditions, and then you'll find out whether you're breaching them? You won't be "breaking the law" (in the sense of being carted off by the cops) though.

AdrianC

benebene said:

but my concern is the risk of the lender demanding 'payment in full' on our £300k mortgage due to our possibly falling fowl of the BTL T&Cs...

It's entirely possible... In which case, you simply remortgage with another lender.

if my family lives in the house on land which is mortgaged in this way, are we breaking the law?!

No.

Markneath

One way is to remortgage the btl property while getting the solicitor to split the title deeds for the two properties at the same time.

If theres not enough equity in the btl you might need to take out a mortgage on your own property at the same time in order to do this. 

I’ve lived in my own btl properties a few times just never registered myself as living there officially.

It was a bit sloppy the way you did it to begin with. 

If you have a 300k btl mortgage outstanding then the btl needs to be worth 400k to get the btl mortgage on it. 

Thrugelmir

benebene said:

Nobody seemed fazed by the new house being on same title as one being valued for BTL loan.

Did you actually bother to inform anyone either before or after you built the property?  How would the conveyancing solicitor have known about the new property being on the same title. They don't see the property in person. The surveyor performing the valuation doesn't see the title deeds either.