Mortgage on property that has a part holiday let

TamsinC · 19 May 2018 at 12:40PM

Yesterday we put in an offer on a house that was accepted. It has a small holiday let attached to the house. We didn't realise until we saw the house that the 'annex' as listed in the details was actually an up and running self catering apartment. We hadn't thought too much about it as an annex other than for using it for when the adult kids came home. However, this puts a slightly different spin on things. Obviously we would need permission from the mortgage company to use the annex in this way. Will it cost us more mortgage wise? Stamp duty wise? Be harder to get? Should we buy purely on a 'normal' mortgage as was our original intent when we didn't know about the let, and then in a year or so ask permission to do so? We don't need the money from any let. Any advice would be very welcome.

AnotherJoe · 19 May 2018 at 4:31PM

Use it in what way? For kids or as a holiday let?

TamsinC · 19 May 2018 at 4:56PM

Well the use would depend on what the difference and obtainability of mortgages was. We haven't decided yet as weren't expecting to have to think about it just yet.

I understand if we just use it for the kids then we require a bog standard residential mortgage.
If we used it occasionally to let out would we need a holiday let mortgage on the whole property? which probably wouldn't really be worth it I think in respect of higher monthly payments.

Or are there other mortgages that allow you to do occasional lets but on a full residential mortgage cos most of the time you don't use it as such.

The calculators I've found are an either or type of thing and the extra £200 a month on the payments (plus all the other considerations) look like it wouldn't be worth it as we would have the kids in it during main holiday season.

es5595 · 19 May 2018 at 5:07PM

I would also check, and then double check, to see if there is a council tax liability for the annexe, as you may well find there is!

TamsinC · 19 May 2018 at 5:24PM

es5595 wrote: »

I would also check, and then double check, to see if there is a council tax liability for the annexe, as you may well find there is!

As its all under the same title wouldn't the council tax cover the whole thing?

EDIT: I can only find discounts for annexes etc.

TamsinC · 19 May 2018 at 5:30PM

O, I am beginning to think this is all too complicated and the 'annex' will just be used as part of the house.

The figures for occasional use as a holiday let just don't add up

Tom99 · 20 May 2018 at 12:58AM

[FONT=Verdana, sans-serif]Still check the Council Tax bands:[/FONT]
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[FONT=Verdana, sans-serif]https://www.gov.uk/council-tax-bands[/FONT]

[FONT=Verdana, sans-serif]Even if the annex is not listed with a separate band the fact it is now being advertised and sold with an annex may trigger the VO to look and see if the annex should have a separate band.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT]
[FONT=Verdana, sans-serif]Then, if no separate CT band, check if it has a separate business rates, rateable value:[/FONT]
[FONT=Verdana, sans-serif]
[/FONT]
[FONT=Verdana, sans-serif]https://www.gov.uk/correct-your-business-rates[/FONT]

SDLT_Geek · 20 May 2018 at 7:56AM

If the annex is self contained enough so as to be suitable for use as a separate dwelling then there are some stamp duty land tax implications to think through. There is information about it here https://www.zoopla.co.uk/discover/buying/buying-a-home-with-a-granny-flat-find-out-if-the-3-stamp-duty-surcharge-could-affect-you/ and in the articles linked from it.

Buying "two properties in one" can mean you end up paying the higher rates of SDLT (the 3% surcharge). But there are rules about "subsidiary dwellings" which can help (with a 2/3 value test). There is also the possibility of obtaining multiple dwellings relief.

But, as you say, lenders tend not to like as security properties which are suitable for use as two dwellings.

TamsinC · 20 May 2018 at 9:42AM

SDLT_Geek wrote: »

If the annex is self contained enough so as to be suitable for use as a separate dwelling then there are some stamp duty land tax implications to think through. There is information about it here https://www.zoopla.co.uk/discover/buying/buying-a-home-with-a-granny-flat-find-out-if-the-3-stamp-duty-surcharge-could-affect-you/ and in the articles linked from it.

Buying "two properties in one" can mean you end up paying the higher rates of SDLT (the 3% surcharge). But there are rules about "subsidiary dwellings" which can help (with a 2/3 value test). There is also the possibility of obtaining multiple dwellings relief.

But, as you say, lenders tend not to like as security properties which are suitable for use as two dwellings.

From that it looks like it wouldn't need the extra 3%. It's attached to the main building, is all under one title, is less than 1/4 of the building. The purchase will be for our main residence. We will be using it as our daughters bedroom. Hopefully *fingers cross* it goes okay.

minimike2 · 20 May 2018 at 10:33AM

Regardless of what it will be used for it isn't about "getting permission" from the mortgage lender as such, it is about if it will fit your lenders valuation criteria or not. Most lenders do not like lending where there is a self contained property / annex on the deeds as it leads to legal issues in the event of repossession where the property has been let.

This isn't a case for submitting an application and seeing what happens. A lender needs selecting who will allow such a property and even then it will still come down to the valuer comments confirming it meets the policy.

SDLT_Geek · 20 May 2018 at 12:20PM

Is the annex is self contained enough to be suitable for use as a separate dwelling? In particular are the services (like heating, electricity, hot and cold water) capable of separate operation and isolation?
If so perhaps you qualify for multiple dwellings relief for SDLT purposes.

Mortgage on property that has a part holiday let

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