buy a house already converted to flats with residential mortgage

[gomo]

Hi Everyone,

I am considering buying a house which is currently setup as 2 flats. I would purchase the house with a residential mortgage, is this possible. I would want to live in one flat and rent/sell the other one.

thanks guys

Mo

[loanarranger]

Straight answer is No given that the property is clearly set up as a multi let unit: any lender will demand that all vestiges of the second flat are removed before the release of monies to complete the purchase.

The sensible solution would be to purchase with short term bridging finance , then create a holding company for owning the Freehold of the property as you cannot grant yourself a lease , create two separate leases with their own respective Ground Rents and Service charges , ensure that each unit is 100% self contained then once you have completed these , apply for a residential mortgage for the unit you wish to occupy (dont be foolish and make a false declaration of your intent to occupy when you may be wanting to rent it out) and then with another lender get a Buy to Let mortgage or just sell it as a self contained flat with its own lease.

[cfaproperty]

Sorry Mo you wont be able to do that, the lender's valuer will report that it is 2 flats and it will all fall over.

Ultimately if you were able to split the title (which you would have to do to sell one part by creating a separate leasehold interest) you may be able to get a residential mortgage on the bit you retain, but take guidance here because Freehold Flats are not supported much and if you create a leasehold title for your flat too, there will have to be a different Freehold owner, you can't be both.

Why not just buy something that is the right size for you?

[cfaproperty]

Obviously replied at the same time Loanarranger

[loanarranger]

No problems two great minds on the same thought process.

[gomo]

thanks for your responses guys. does it make any difference as to the LTV ratio when it comes to buying a property already converted into flats. Also if i bought a house and then convert it to 2 flats. what are the implications there as far as the mortgage is concerned.

Mo

[loanarranger]

Same as before , create a holding co to own the Freehold and then create separate leases: however if you are intending to buy a property , convert into 2 self contained flats and are genuinely going to rent both , there are a handful of lenders who will lend on a single unit which has the benefit of two self contained units but without leases. You can if you are able to satisfy the criteria of the lenders involved obtain a mortgage of up to 75% but the property will be valued on an Investment Value basis and not as an Open Market Value , so in short the value is very dependent on the location , rental for both units. You may be fortunate to get an investment valuation which is close or on par with an OMV but from experience this can be anything up to 15% below an OMV figure.

[mattl]

Also if i bought a house and then convert it to 2 flats. what are the implications there as far as the mortgage is concerned.

In simple words - what you're intending to do is mortgage fraud, because you clearly realised that residential mortgages are (a) easier to get and (b) cheaper than buy to let mortgages so you think you're cleverer than the system. Unfortunately you will fail and hopefully the potentially dire consequences of this will be sufficient warning for you to not try your luck with silly games like this.