Split a freehold to remortgage?

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    Split a freehold to remortgage?

    Hello all.

    I have a shop with a 1 bed flat above and a 2 bed flat behind (all on 1 freehold title). Value is probably around 350K and I currently have a mortgage of 140K at 6% which is costing a whopping £740 a month.

    I would like to remortgage and I've seen offers for 5 year fixed BTL at 2-3% which would save me £400 a month - worth having!

    Problem is, I don't think I can mortgage just the two flats without including the shop, which makes it a mixed commercial, at higher rates.

    Would I be better splitting the title and mortgaging the two flats (with 2 lots of fees)? I think there's enough equity to give LTV of around 60% on the flats.

    Also, would they have to be leasehold as they have a combined stairwell?

    Any downside to having three separate titles?

    Thanks. Andrew

    #2
    What percentage of the building is occupied as a retail unit and then what are the sizes of the individual flats in terms of sq Metres.
    Ideally you would indeed have to create separate leases but you cannot grant yourself leases as you own the Freehold.
    On the Mortgage front, the next issue is the respective values of each of he flats, some lenders have a minimum value of between £50k and £75k. Once established the next issue is getting mortgages secured against each unit with the lenders being reluctant to lend on adjacent units.
    Firstly speak to your solicitor and then find a good qualified broker to try and source one or more lenders. The final caution is what is the commercial use of the retail unit and whether there are any fast food outlets in close proximity or restaurants/ licensed premises.

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      #3
      Thanks for the info. The retail is approx 1/3 of the total. Don't know sq. M but the one over is a studio flat, worth about 110K and the one behind is a 2 bed on 2 floors, worth about 150K, so I'm guessing I could raise enough without putting the shop into the mix. Shop is a charity, they are fantastic tenants and it's their most productive shop so they should want to stay. No fast food anywhere near.

      Comment


        #4
        As long as the studio has the absolute minimum sq ft / Mt you might stand a chance. Speak to a lender like Shawbrook , not the cheapest but quite accommodating.

        Comment


          #5
          Thanks again.
          I'm with Shawbrook at the moment and it's costing me an arm and a leg!

          Comment


            #6
            I agree that the rates are higher but the only other source who JUST might consider such a proposal is Together Mortgages but as you will see the terms are not for the feint hearted: unfortunately the type of proposition falls outside the scope of main Btl lenders.

            Maximum LTV (loan to value) – 65%
            • Maximum loan – £500,000 (more by referral)
            • Rates start from 7.90%
            • Repayment terms – 7 to 30 years
            • Interest Only terms – 7 to 10 years
            • Maximum age – 80 years at end of term
            As an outside short , speak with Bath Building Society , they certainly operate an open mid policy .

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