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Tag: Buy to let & commercial

Q&A; Do I need a buy-to-let mortgage to take a lodger or sublet?

Question; I want to buy a property and let a room or several rooms out; is this a buy-to-let?

There are two aspects to this question; legally, any property where you, or your direct family members, occupy more than 40% of the habitable space is considered a regulated residential mortgage.

So, a buy-to-let mortgage usually precludes you or a family member from occupying the home. Except for a limited number of “regulated buy-to-let” products, which only have niche uses.

These buy-to-let products are rarely preferable as most residential lenders allow you to take a lodger or two, subject to certain limitations, and are generally less expensive.

It is vital to check with your lender if they allow lodgers, as some won’t. But most require that lodgers occupy the home as a friend and don’t have a self-contained unit like a granny annexe, although a small lock on a bedroom door is unlikely to be a big problem.

Lenders often request that no formal tenancy agreement is in place and that the lodger signs a “consent to mortgage form”. These are important to limit the lodger gaining complex legal rights to remain in the property, even in a non-payment dispute.

Where this gets confusing; is reading your mortgage offer conditions which usually state that subletting is prohibited!

This likely refers to precisely that point; making a formal tenancy agreement with a lodger can grant them rights that are prejudicial to you as the homeowner: and the mortgage lender if they ever had to repossess.

If you want to let a self-contained unit like a granny annexe, particularly with a formal tenancy; then it is hard to do this whilst remaining on the right side of the law with your mortgage lender; as most buy-to-let deals won’t allow you to occupy any part of the home, and most residential lenders won’t let you sublet any part.

If you want to purchase or part-occupy a multi-unit block (a block with several self-contained flats) then this is possible, but there are very few lenders entertaining these transactions; you will benefit from using a mortgage adviser as most of those lenders will only offer products through qualified brokers.

These are the legal aspects relating to the mortgage conditions; the second part of the question relates to health & safety, local planning bylaws, protections for tenants and insurance.

At any point where you take a lodger, it will be your responsibility to ensure that you comply with any bylaws regarding letting in your locality, which may include local licensing schemes.

You might need to get regular gas safety inspections or take alternate home insurance.

Where multiple lodgers reside with you: this may fall under requirements for houses of multiple occupation or “HMO” licensing, which can involve requirements around fire protection and electrical installations, among others.

It is vital to take all these aspects seriously. Failure to comply with HMO licensing can incur fines in the tens of thousands of pounds, and the rules are well enforced. Breaching your mortgage conditions could result in the repossession of a property.

And finally, for those in a leasehold property, you need to ensure the terms of your lease do not prohibit you from taking a lodger or sub-letting. Breaching your lease agreements can again end in repossession.

If you need help with any of these types of transactions, contact us for more information.

Q&A; Mortgages with older and elderly or retired applicants over the age of 70

Can someone over the age of 75 go on a mortgage?

Occasionally we are asked if we can arrange mortgages for elderly, or retired people of age 70, 75, 80 or even 90.

That will depend on the circumstances: whether the mortgage is for a buy-to-let or Residential property, if it is a joint application and if the income of the older applicant is necessary for affordability.

Most lenders for buy-to-let mortgages will have a maximum age of up to 80, but some have no maximum.

For Residential mortgages, where the income of the older applicant is required in the application, most lenders will not go beyond the age of 75-80. Many may be even more restrictive.

If it is a joint application with a younger applicant who can afford the mortgage in their own right, then some lenders will ignore the age of the other applicant entirely.

Other products available to seniors, such as ‘Lifetime Mortgages’ and ‘Home Reversion Plans’, may be more suitable, which work in very different ways to traditional mortgages and require specialist advice.

It is important to remember that all applicants on a mortgage would be responsible for the payments regardless of whether their income is used in assessing the case.

Therefore, as part of the advice process, we would consider arranging protection in case of death, illness or injury to either party.

To get expert advice, call 0345 4594490 or fill in our short enquiry form.

85% loan-to-value buy-to-let mortgage products released by Kensington

It has been a long time since we’ve had significant news about new products; this morning, Kensington Mortgages announced one of the most significant indicators to date; that mortgage lending is returning to normality.

Their new buy-to-let product range is available up to 85% loan-to-value even for first-time landlords; although the arrangement fees on the 85% product are 2.5%, it is still a step forward for buy-to-let landlords.

It is available on up to 3 properties, with an interest rate of 5.99% fixed for two years, and a portfolio maximum of £1 Million or three properties on the product.

Rental coverage requirements are also lower than the competition, with a rental yield requirement of 120% coverage at the pay rate; this should help to ensure that the products are viable.

The range also allows first-time landlords into the market at 80%, and at this loan-to-value, there is a flat fee product option in addition to the 2.5% fee option, which will work well for those borrowers with higher property values.

The products are available for purchase and remortgage; however, they are only available for properties in England and Wales and have a minimum income requirement of £25,000 or £30,000 above 75% loan-to-value.

For more information on these products, please call one of our mortgage advisors on 0345 4594490.

Q&A; mortgages for flats over shops and houses adjacent to commercial property

Q&A; Mortgages for flats above shops and commercial property

Question; I am buying a flat above a shop or other commercial premises; I understand this can be difficult; what do I need to be aware of?

Lenders always have to be aware of risks that may affect the value of a property and its saleability should the loan go into default.

A flat above a shop or commercial premises has several risks that a lender will consider in making a loan.

These include the nature of the business the flat is above; if it would cause little disturbance to the owners (think florist or estate agent), it is less of a risk.

However, a flat over a fish and chip shop, where late opening hours and food smells may affect the ability of the lender to re-sell, would be challenging to mortgage.

The usual suspects are all varieties of hot food outlets, any kind of bar or off-license, shops with late opening hours or antisocial attributes, and more bizarrely; beauty salons and hairdressers.

Lenders will consider the location of the flat. A flat over commercial premises in an area like Chelsea or Knightsbridge would still command a significant value and appetite for lending.

But the same property in an unfashionable part of a city like Manchester or Liverpool would be far harder to mortgage.

Another issue is access; a mortgaged property must have independent access; if this is too close to the working areas of a kitchen or similar commercial activity, it is unlikely to be a compelling security for lending.

And it isn’t just flats that suffer this issue or properties with commercial premises directly below. Any commercial premises directly adjacent to a property or within a few hundred yards may present problems.

The main consideration is how it affects the desirability of a property. A haulier’s yard fifty meters from a house could limit your choice of lenders but probably wouldn’t leave you without mainstream options. A house abutting a giant scrapyard would likely be a challenge.

Be aware as a potential purchaser of such a property; hard to mortgage may mean hard to sell. And a property that might have a few interested lenders during a boom; may be harder hit by falling prices in a downturn due to a total lack of interested lenders.

For further information and advice on flats over or adjacent to commercial property, call one of our mortgage advisors on 0345 4594490 for independent mortgage advice.

80% Loan to value buy to let mortgages return from the mortgage works.

Mortgage Interest rates continue to creep slowly downwards towards the current bank base rate of 0.5% and it’s clear to mortgage brokers that while the range of products on offer in the market currently is still a major factor preventing true growth in the property sector particularly in buy to let, It is still very encouraging to see the mortgage works increase their maximum loan to value for buy to let mortgages to 80%.

The new products are quite competitively priced and so this reduction of minimum deposit size is one of the few examples of lenders returning to a competitive spirit since HSBC announced their 2% tracker rates more than a year ago.

Fixed rates are available from 4.69% with a 2.5% arrangement fee, 5.69% with a 1.5% fee and 5.79% with a £1795 arrangement fee and a 5% early repayment charge during the initial term of the product. Standard legal and valuation charges would apply.

A lending limit of £350,000 at this LTV will reduce the popularity of the product in the south east but should help to ensure that TMW are not saturated with new business, and it is likely that this too will be increased in the not too distant future.

For further information about these products please speak to one of our mortgage advisors on 0845454490.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. WE TYPICALLY CHARGE AN ADVICE FEE OF £299 PAID UPON FULL MORTGAGE OFFER. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
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