Mortgage refusal for existing planning app

Harrywebber

Hello There, 

I’m trying to purchase a property which is a detached country house with 3.5acres. In the middle of the acreage there is some stables and workshop/outbuildings that the current owner has got planning permission for a 3bedroom bungalow on. 

Have gone through all the rigmarole of mortgage app to be turned down at final hurdle on valuation due to the property having planning permission in place for another dwelling. 

Is this something anyone has come across and if so is there possible aways around this. 

Secondly is this just a Santander stipulation or is this a common issue among mortgage lenders. 

Many Thanks, 

K_S

Harrywebber said:

Hello There, 

I’m trying to purchase a property which is a detached country house with 3.5acres. In the middle of the acreage there is some stables and workshop/outbuildings that the current owner has got planning permission for a 3bedroom bungalow on. 

Have gone through all the rigmarole of mortgage app to be turned down at final hurdle on valuation due to the property having planning permission in place for another dwelling. 

Is this something anyone has come across and if so is there possible aways around this. 

Secondly is this just a Santander stipulation or is this a common issue among mortgage lenders. 

Many Thanks, 

@harrywebber Santander is actually one of the better lenders for large acreage with outbuildings, which is presumably why your case has been placed with them.

While I don't know off of the top my head how lenders approach this issue, I can't imagine it's an unsurmountable problem with all lenders.

Unless the client pointed it out, this is isn't something that I would check with the lender beforehand but since it has now been highlighted, just requires your broker (or you if direct) running this (along with the other specifics) past other lenders in advance and find a lender that will consider.

Harrywebber

I am actually already with santander and just porting my mortgage across. They haven’t done me any favours on rate but worth staying as I will save on my early redemption penalty. 

We have since checked with 3 other lenders all taking nearly an hour each on the phone to get through. To which they replied they have never know it be an issue but the decision is ultimately with the underwriter and valuer. Suggesting we just make the application. 

We are now going back to santander to see if we can split the title. Therefore they would only be lending and have the charge on the portion of land without the planning consent on. It’s a but wishy washy but ultimately comes down to the fact if they still value the building within reach of my LTV without the small section of land in the title then it shouldn’t be an issue but don’t know how this would be viewed. 

The most frustrating thing is, the local council have no way to revoke the planning at all it just has to run its course until it expired. Secondly I have offered them to sign any legal contract/covenant etc saying I will not build it and let it expire. 

I also have no interest in this planning permission and wouldn’t build it if i had the opportunity to. 

But just don’t seem interested now. 

Harrywebber

Is there any reccomended lenders that wouldn’t see this as an issue but more of a bonus as 99% of people would?

K_S

Harrywebber said:

Is there any reccomended lenders that wouldn’t see this as an issue but more of a bonus as 99% of people would?

@harrywebber Sorry, I don't know off of the top of my head. I'd just put the pertinent facts together and speak to BDMs and valuers (some lenders will let you do a pre-app check with their valuers) to find a suitable lender.

Since you are looking beyond Santander, is there any particular reason you're trying to DIY it? I know very little about your case so couldn't say that you'll definitely get a mortgage but a good experienced broker might help.

I usually point people towards the MSE broker guide here. I don't think this is one for the likes of L&C/Habito/Trussle but the brokers lower down the list may be able to help.

https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

Alternatively, you could get recommendations from friends, family, colleagues for a broker they've used and trust.

Good luck, I hope you find a lender to make the purchase!

ACG

What is the LTV? Presumably the outbuildings with PP has added some value to the property?

Potentially (if a low LTV) you could buy the property, but ask for the surveyor to value the property and the land without the property and then seperate the deeds. The land would be unencumbered and the home would have the mortgage on. It will come down to the numbers though and unlikely to work unless you are already around 50-60% LTV. 

user1977

Out of interest, can anyone here explain the lenders' difficulty with this? Is it the risk of the borrower deciding to carry out the development without lender consent?

Harrywebber

ACG, 

This is what we are trying at the moment. Splitting the title and selling the outbuildings ploy for a nominal figure and then remaining land and property aiming to get the mortgage on that.

Im Currently at around 62%LTV. 

My Mortgage broker has uploaded the two title plans onto the santander system today so hopefully within a few days we may know a bit more. All depends on how they want to look at it I suppose. 

But in my mind as long as the valuation/LTV adds up with the main house and majority of land I don’t see it being an issue. 

Harrywebber

user1977 said:

Out of interest, can anyone here explain the lenders' difficulty with this? Is it the risk of the borrower deciding to carry out the development without lender consent?

Would be interesting to find out. When my broker rang them to try and get an understanding of it. Only answer he got was. They don’t land on propertys with outline or planning permission valid within the property boundary. They couldn’t elaborate was just that. 

Some have suggested that Santander are tightening there belts and using any excuse nessecary to get out of lending on anything they don’t want to.

because of the planning there may of been a higher risk so they’ve just decided to say no and save them self some “possible but unlikely” grief. 

simon_or

user1977 said:

Out of interest, can anyone here explain the lenders' difficulty with this? Is it the risk of the borrower deciding to carry out the development without lender consent?

From Santander's point of view as a mainstream prime residential lender, the large plot size, existing outbuildings and planning permission taken together are probably sufficient to introduce the risk of this essentially being a quasi development loan. There may also be other details in the background (layout, etc.) which add to the above.

I know that the OP does not have any intention of developing the plot but Santander only needs it to be slightly outside the mainstream for it to be too risky for them when they have plenty of vanilla business to service.

Having said that, this doesn't at all sound like it would be unplaceable, just needs the broker to do the rounds.

Harrywebber

simon_or said:

user1977 said:

Out of interest, can anyone here explain the lenders' difficulty with this? Is it the risk of the borrower deciding to carry out the development without lender consent?

From Santander's point of view as a mainstream prime residential lender, the large plot size, existing outbuildings and planning permission taken together are probably sufficient to introduce the risk of this essentially being a quasi development loan. There may also be other details in the background (layout, etc.) which add to the above.

I know that the OP does not have any intention of developing the plot but Santander only needs it to be slightly outside the mainstream for it to be too risky for them when they have plenty of vanilla business to service.

Having said that, this doesn't at all sound like it would be unplaceable, just needs the broker to do the rounds.

Is there anyone that you would point me in direction of or a way of finding out who would lend? 

I spent nearly 3 hours ringing 3 different lenders who couldn’t put me through to anyone and couldn’t tell me an answer. All they suggest is that we make an application.