Buy the remaining flat in a 2-storey mid-terrac house

proformance

I already have a mortgage on the ground floor property of a mid-terraced Victorian house, and I wonder what the process might look like if I ever wanted to buy the 1st (top) floor flat as well, with a view to converting the whole property back to a single residence.

If it is useful context:

• Share of (ltd company) freehold of the building
• The upstairs flat (1st floor) is currently let out
• Assume the 1st floor flat's value is largely the same as my existing ground floor one - thus I'd be theoretically (nearly) doubling my borrowing 

While a little more difficult to explain to a lender, I guess it's not too crazy for them and the lending criteria would be exactly the same as any other arrangement?

eddddy

proformance said:

While a little more difficult to explain to a lender, I guess it's not too crazy for them and the lending criteria would be exactly the same as any other arrangement?

A mortgage lender would regard this as a development project, so they wouldn't give you a residential mortgage for that.

You'd have to find a company who would lend you development finance. It would probably work like this:

You borrow enough development finance to do these 3 things:

• Pay off your current mortgage
• Buy the second flat
• Pay for all the conversion work

Once you have completed the project and have a single house, you could apply for a residential mortgage. Once you get the mortgage, you could pay off the development finance.

But development finance is very expensive...

... and you might find it difficult to persuade anyone to lend you development finance, as presumably you have no proven track record in developing properties. So you would be considered very high risk.


(Also, converting 2 flats into one house will generally be loss making. Developers generally make a profit by doing the opposite - converting one house into multiple flats.)

RHemmings

proformance said:

I already have a mortgage on the ground floor property of a mid-terraced Victorian house, and I wonder what the process might look like if I ever wanted to buy the 1st (top) floor flat as well, with a view to converting the whole property back to a single residence.

If it is useful context:

• Share of (ltd company) freehold of the building
• The upstairs flat (1st floor) is currently let out
• Assume the 1st floor flat's value is largely the same as my existing ground floor one - thus I'd be theoretically (nearly) doubling my borrowing 

While a little more difficult to explain to a lender, I guess it's not too crazy for them and the lending criteria would be exactly the same as any other arrangement?

Out of curiosity, what is your acceptable timespan to convert the property into a single residence? And how long will your current mortgage last? 

One possible model, though a very long-term one, is to buy the upstairs flat with a BTL mortgage, and then rent it out. You have some control over the upstairs flat, and while there are a whole list of risks, I'm presuming from your OP that you can afford to pay the mortgage on both. So, voids may not be a huge lose-the-property problem. I'm also assuming that you have done the numbers and can cover the mortgage for the combined property (doubled mortgage) even if interest rates go up again, etc. 

If you do have a tenant upstairs, then that may cover the mortgage on the upstairs property. And, if you could afford double your current mortgage, then you could considerably overpay your current (or the BTL) mortgage to reduce its timespan. 

I'm guessing that you won't want to do this, but it is one possibility. 

NameUnavailable

You would need PP to convert back to one dwelling - not a given that it will be granted!

proformance

My neighbour two doors down has done the same thing - bought the upstairs property and in the throes of converting to a single dwelling, so I don't think PP will be an issue.

It doesn't sound like a cost-effective solution though? 

I wondered if there'd be any financial upside in doing this, versus buying a (theoretically) the same property (same value assumed), but I guess not? 

Cons:
1) because the development financing sounds expensive 
2) because of the PP and actual development costs (to convert) 
3) possible PP headache 

Pros:
1) less stamp duty as we'd only be buying half the property versus stamp duty on a 2 storey 
2) no moving costs 


To summarise, nobody thinks that this is a financially beneficial idea? And unless wedded to the property/area, there is no financial or other upside in doing so? 

RHemmings

It seems that it may depend on the council as to whether planning permission is needed or not. 

https://www.planningportal.co.uk/permission/common-projects/flats-and-maisonettes/i-want-to-convert-flats-into-a-house-amalgamation-deconversion

lincroft1710

Often a flat conversion in a house would sell for more than half the price of the house, had it remained a single dwelling. Adding the costs of conversion and this may not be an economic proposition.

user1977

proformance said:

Pros:
1) less stamp duty as we'd only be buying half the property versus stamp duty on a 2 storey 

Probably more stamp duty because you'd have to pay the additional rate for buying the upstairs flat as a second property (the stamp duty is determined on the basis of the position at completion of the purchase, not what you're planning to do with the property).

proformance

user1977 said:

proformance said:

Pros:
1) less stamp duty as we'd only be buying half the property versus stamp duty on a 2 storey 

Probably more stamp duty because you'd have to pay the additional rate for buying the upstairs flat as a second property (the stamp duty is determined on the basis of the position at completion of the purchase, not what you're planning to do with the property).

I was comparing to to selling my flat and buying (for the sale of argument) and house.. 

So I'd be paying for stamp on a top floor flat rather than the stamp on a whole house. I hope that makes sense.. 

user1977

proformance said:

user1977 said:

proformance said:

Pros:
1) less stamp duty as we'd only be buying half the property versus stamp duty on a 2 storey 

Probably more stamp duty because you'd have to pay the additional rate for buying the upstairs flat as a second property (the stamp duty is determined on the basis of the position at completion of the purchase, not what you're planning to do with the property).

I was comparing to to selling my flat and buying (for the sale of argument) and house.. 

So I'd be paying for stamp on a top floor flat rather than the stamp on a whole house. I hope that makes sense.. 

Yes. You'd be paying the surcharge for buying an additional property if you bought one flat while still owning the other one. Whereas if you sold your flat, and bought a house, you'd be paying the normal rate of stamp duty on your purchase. How much of a difference that makes depends on the prices involved.

AlexMac

I haven’t read all the above doom and gloom posts but can I observe that I bought a three storey cottage like this where I owned the freehold and the two upper floors. The lower floor was leasehold. 

I sold  it on and my buyers subsequently made a mint by buying out the basement flat and reintegrating the original single dwelling. 

So go for it if, like round here, houses are worth more than flats