Commercial mortgage required?

MsPennyMoney

Good morning, 

Our local council is selling a property which they were most recently using as offices. The property was originally built as a detached residential property and is situated in a quiet residential street. 

Having viewed the property we are very keen to submit an offer with the intention of making it our ‘forever’ home. I understand that change of use will need to be granted in order to secure a residential mortgage on it. On speaking to the surveyor at the time of viewing, they indicated that they would see no objection since, for all intents and purposes, the property is a house which was being used as offices. 

My question is how would I go about funding the purchase until change of use is granted? Would this require a specialist lender? 

We would be selling our current home and would have around 40% deposit. 

Thanks in advance. 

user1977

The simpler way of doing it would be to enter into a contract conditional on you getting consent for change of use, and then buy with a residential mortgage.

MsPennyMoney

Thanks for your reply. 

So if our offer was accepted we would apply for change of use and at the same time apply for a residential mortgage subject to change of use being granted? 

It’s all hypothetical at the moment but I’d just like to know the best way forward. I think I was over complicating it in my mind and thinking it would require specialist lending! 

user1977

MsPennyMoney said:

So if our offer was accepted we would apply for change of use and at the same time apply for a residential mortgage subject to change of use being granted? 

 

Yes. Obviously the risk is that you might be competing with buyers who can either afford to take the risk, or don't need change of use at all.

MsPennyMoney

We are aware that there might be cash buyers out there for whom the change of use isn’t an issue or like you say, people who don’t need change of use at all, however we feel that it is a fantastic opportunity and that it’s worth exploring all our options. 

Would a bridging loan or commercial finance be a way round the change of use clause? 

user1977

MsPennyMoney said:

Would a bridging loan or commercial finance be a way round the change of use clause? 

A "normal" commercial mortgage would be aimed at a business actually using the property, so that's no use for you.

Bridging loans are very expensive, especially if you have no idea how long you need them for - what's your exit route if you don't get the change of use?

MsPennyMoney

I see. 

Yes I understand that bridging loans are expensive. From speaking to the surveyor the change of use process takes approximately 8 weeks. Whilst she couldn’t commit to guaranteeing that change of use would be granted since that’s up to the planning department, she did say that she would be very surprised if it was rejected. 

The property is a detached sandstone villa in a residential street with only 6 other houses of similar style so while I understand that you can never assume anything when it comes to planning permission, I’d be confident that change of use would be granted. 

user1977

The other risk to consider is that something else crops up (e.g. in your own finances) to prevent you from remortgaging whenever the planning comes through, and you're then stuck on the bridging loan.

MsPennyMoney

No I totally understand what you’re saying and although we think it’s a fantastic opportunity we wouldn’t take any unnecessary risks when it comes to our home. Our current house is perfectly fine. We’ve just finished totally refurbishing it so it would take something exceptional for us to move. It just so happens that this came on the market! 

I just wanted to get people’s opinion on how to finance such a purchase because it seems so complicated to me but I guess it’s something that brokers are experienced in.

lincroft1710

There is nothing to stop you applying for a change of use before you buy the property.

Thrugelmir

Is the property habitable as a residential home in it's current state?