Mortgage for house with land - making offer

se2020

Looking to purchase a house with land,

This is currently marketed in 3 listings,
One as the house & 7acres at £450
Then the house and land separately for £350 and £100

I have a deposit of £150

The house is a normal semi-detached cottage with a 1/4 acre garden

The land is 7 acres adjoining/surrounding the garden and is agricultural land.
I would intend to use it to keep horses on (domestically/pleasure)

Looking into mortgages and it seems they are readily available although a lot of lenders seem to restricted the maximum acreage to 4 or 5 acres.

I'm wondering if it would be a sensible strategy to make an offer of £387.5 for the cottage and 3 acres plus an offer of £62.5 for the other 4 acres.

So still a total of £450 but I would then purchase the land with "cash" and fund the house with a mortgage and a 25% deposit.

My thinking is that I will then have a greater choice of lenders and find it easier to get a mortgage on a house with only 3 acres.

My concern is that the mortgage company will not value the house & 3 acres at £387.5 

I am also a first-time buyer so I am presuming even if both sales complete at the same time I may end up paying more in stamp duty / land tax plus additional fees for 2 purchases?

Would be interested to hear any thoughts on this, Thanks!

user1977

I don't think it will make any difference to the stamp duty as the transactions will be linked anyway. Probably not a massive difference in legal fees.

eddddy

The mortgage lender might be unhappy with your strategy.

In simple terms, the background and reasons are as follows:

• Some mortgage lenders won't lend on a house plus 7 acres - because they are worried that you could rent the property out on an agricultural tenancy (without consent), and then stop paying your mortgage.

• The mortgage lender could repossess the property - but it's almost impossible to evict an agricultural tenant. So they'd probably have to sell the property with a tenant, and it might only get a fraction of the mortgage amount back.

And if you buy a house with 3 acres of land, and also buy 4 acres of adjacent land...

.... you will end up owning a house plus 7 acres of land (across 2 titles).

And you might rent out the house plus 7 acres on an agricultural tenancy (without consent), and stop paying your mortgage.

And the mortgage lender has the same problem.

So the mortgage lender may not agree to give you a mortgage on that basis.


You may be breaching your mortgage contract if you buy the adjacent land without telling the mortgage lender. (And technically, it's probably mortgage fraud if you've planned it all in advance.)

So you probably need to check your plan with your mortgage lender before proceeding.




Edit to add...

And if you buy both properties at the same time using the same solicitor, the solicitor will tell the mortgage lender, even if you don't.

Bookworm105

also bear in mind that you must ensure the properties are never combined as a single title, otherwise when you come to sell you will be subject to capital gains tax as that applies to any residential property comprising a "permitted area" of more than half a hectare, ie a bit over one (English) acre

Better to keep them as separate properties as the agricultural use restriction will then make the CGT a lot cheaper.

Albermarle

Some mortgage lenders won't lend on a house plus 7 acres - because they are worried that you could rent the property out on an agricultural tenancy (without consent)

So I am guessing that an official agricultural tenancy would not be applicable for 3 acres, if you rented that out ?

sheramber

Have you researched the planning legislation for keeping horses on agricultural land. 

https://www.mpdbuiltenv.co.uk/agricultural-use-v-equestrian-use-is-there-a-difference-and-why-does-it-matter/#:~:text=If you want to use,against you by the Council.

SDLT_Geek

se2020 said:

Looking to purchase a house with land,

This is currently marketed in 3 listings,
One as the house & 7acres at £450
Then the house and land separately for £350 and £100

I have a deposit of £150

The house is a normal semi-detached cottage with a 1/4 acre garden

The land is 7 acres adjoining/surrounding the garden and is agricultural land.
I would intend to use it to keep horses on (domestically/pleasure)

Looking into mortgages and it seems they are readily available although a lot of lenders seem to restricted the maximum acreage to 4 or 5 acres.

I'm wondering if it would be a sensible strategy to make an offer of £387.5 for the cottage and 3 acres plus an offer of £62.5 for the other 4 acres.

So still a total of £450 but I would then purchase the land with "cash" and fund the house with a mortgage and a 25% deposit.

My thinking is that I will then have a greater choice of lenders and find it easier to get a mortgage on a house with only 3 acres.

My concern is that the mortgage company will not value the house & 3 acres at £387.5 

I am also a first-time buyer so I am presuming even if both sales complete at the same time I may end up paying more in stamp duty / land tax plus additional fees for 2 purchases?

Would be interested to hear any thoughts on this, Thanks!

It sounds as if the property is England as you mention stamp duty land tax (SDLT) and first time buyers relief.

The SDLT first time buyers will not be available if as well as the house, you buy in a linked transaction some other land which is not part of the garden and grounds of the house.  That could be a tricky issue.

If the land with the house does not all count as "garden and grounds" of the house, then the transaction would count as of "mixed property".  That has different rates of SDLT from residential property.  At a price of £450,000 the SDLT on mixed property rates would be £12,000.