THE QUESTION

I have found a property I want to get a buy to let mortgage for, but I have a bad credit rating.  The house also has no kitchen, are there any lenders that would be able to provide a mortgage for this?

THE ANSWER

Take a reality check on this one, you have zero chance of getting a mortgage on this property as a means of buying it.

Leaving aside your credit history, a property has to be lettable on day one to get a mortgage; if it has no kitchen, it plainly isn’t that. So it is a non-starter in the way you want to purchase it.

For a property to be mortgageable:

• As a main residence - it has to be habitable
• As a BTL it has to be lettable and that is different to habitable. It means, in the lenders' surveyor's opinion, a tenant would want to pay good money to rent it on day one

Fitting a kitchen between exchange and completion might work, but if the rest of the property is not in good repair, it is still unmortgageable.  It's very...

THE QUESTION

When looking to buy a BTL property at what point does the length of the lease term start becoming a factor and should be taken in to account?

THE ANSWER

80 years is a pivotal number, because you cannot get the freeholder to extend the lease until it reaches 80 year point. However, from a mortgage lenders point of view 80 years is not that pivotal, it is quite easy to get a mortgage below 80 years but it does start to get problematic the further you drop below 80 and when the lease has 70 years or fewer to run it starts to become an issue for mortgage lenders.

Mortgage lenders like to have a comfort zone of years left on the lease at the end of the mortgage and this will vary lender to lender, some want as much as 45 years, others will be happy with 30 years and most would be somewhere in between. Given that most people take a 25 year mortgage then 70 years become the pivotal number in terms of getting mortgage lending. Below 70 years and your choice of lenders steadily...

THE QUESTION

What’s the best way to fund an auction purchase?  Do I need bridging or will any lenders give an undertaking to release funds WITHOUT knowing the final purchase price?  And who can beat the 30 day completion date deadline?

THE ANSWER

You have a small number of finance options when buying property at auction:

1. Mortgage
2. Your own cash
3. Someone else’s cash
4. Bridging finance

Given the tight completion deadline of an auction purchase, do you really trust a mortgage lender to underwrite, survey, issue an offer in sufficient time for your solicitor to do the legal work to complete in time?  You would be a brave man if you do.

Assuming that, as you’re asking the question, we can rule out your own cash as an option, let’s look at the other options:

You can use private money, but what will that cost and how reliable will they be?  I am dealing with an auction purchase right now that went down that route; two weeks after the...

THE QUESTION

I am considering buying a flat that was converted in 2008 – without planning permission.  The landlord tried to get retrospective planning permission two years after conversion (2010), but the Council rejected the application.

Now the property is up for sale and I think a bridging loan wouldn't be a problem, but a mortgage company would ultimately require an indemnity policy.  Is there a helpful solicitor willing to scan through the papers for me before I spend ludicrous amounts of money on a no-go?

THE ANSWER

Bridging finance would certainly work in terms of securing the purchase.

A mortgage lender would require a legitimate conversion, not the current illegitimate one – in other words, a Certificate of Lawfulness.

To get a mortgage you, as the new owner, will need to get planning approval (CoL) for the flat.  No planning approval = no mortgage = no way to repay the bridging loan.  An indemnity policy is a red herring.

The Council...

THE QUESTION

I want to release some equity from properties I currently have to purchase some more.  Who would be the best person to give me advice?

I'm also trying to find out how easy a property is to remortgage once it's been renovated.  Is there a specific period of time you have to wait before you can remortgage?

THE ANSWER

My first tip is to pick an adviser who is an investor themselves, they will understand your thinking in terms of recycling your cash; some mainstream advisers know very little about investing in property.  If you find yourself teaching your broker, you have the wrong broker.

On your second point, almost all BTL lenders restrict applications to remortgage a property that you own until you have owned it for six months. It is often referred to as the 'six month rule', but is optional as to whether lenders choose to invoke it or not.

The very few BTL lenders who choose not to invoke it will remortgage your property within 6 months of purchase, BUT...

THE QUESTION

I’ve found a shop currently let at £350 pm with a separate flat above currently vacant, but will bring £300-350.  The asking price is £69k and, although I've had £60k rejected, they'll take £65k.

Firstly is this a good deal? What will it cost me to buy it with commercial finance? What should I expect to pay in monthly payments and are there any fees other than what you would normally have with residential?

THE ANSWER

It’s highly unlikely to get a commercial mortgage at a decent loan-to-value to fund the purchase given that the property is only partially let.  Commercial lenders’ primary concern is how the monthly payment is afforded from day one and you are 50% down on full rental income.

The other issue is that £65k is below most commercial lenders minimum loan of £75k.

Here are some things to consider:

• Is it possible to rent the flat out by the room to increase rental income?
• What business is...

THE QUESTION

We are working towards being able to buy houses outright with cash either to do up and sell on, or to rent out and remortgage later.

Other than the obvious benefits of potentially getting better deals by being a safer bet for the buyer and not having to deal with things like bridging interest rates can you offer any guidance on the pros and cons of using this method?

I presume the conveyancing process is a little easier and conversely I guess you may miss other opportunities while your cash is tied up, but any other insights would be much appreciated.

THE ANSWER

This aligns closely to what I teach on my workshops. Cash buyer status is considered by many to be property investor nirvana and gives you multiple advantages.

1. Speed: you can complete purchases in a matter of days. If that is important to a vendor, this will blow away competing mortgage-dependent buyers.
2. Bigger Profits: being a cash buyer means you can leverage your status to buy cheaper. My Dad’s stock...

THE QUESTION

I am looking at a property block of flats that records show hasn't had any sort of planning for a conversion.  However, the land registry shows that one of the flats is on a lease. There are three dwellings in the block shown on the planning map. Does that mean that the property may have been converted without consent?

If they have no planning consent then can I offer to buy out the freehold and create leases on the properties?

THE ANSWER

For decades landlords have decided, almost on a whim sometimes, that they can get more income out of a house converted into flats than a single house.  Some apply for the required planning permission to do the conversion; some don’t bother and just do it anyway because it seems like a good idea to them.

If you have checked with the local planning office and they tell you no permission has ever been granted, then it will have been an illegal conversion.

This makes it unmortgageable as no lender will lend where the...

THE QUESTION

With an inherited BTL I’m about to purchase another property.  This is a two-bedroom maisonette with 53 years remaining – but with only 53 years on the lease.  I know this needs to be extended to make the property viable for a BTL and have researched the process – so I know what to do and how to do it, but how difficult is it in reality?

THE ANSWER

It is not hard to extend a lease; you just enter negotiations with the freeholder and agree a price.  The cost is progressively greater the fewer years left on the lease.

Negotiations to extend a lease can begin when the remaining term drops below 80 years. You would be very well advised not to negotiate on your own behalf, but engage a solicitor or other suitably qualified person highly conversant with leasehold law to negotiate on your behalf. Choose a solicitor that specialises in leasehold law.

Clearly you cannot agree a price to pay for this flat until you have clarity on how much it will...

THE QUESTION

We are converting a 4-bed house into 2 x 1 bed flats and 2 x 2 bed flats. We were going to sell, however we are now thinking about forming a company, keeping and renting them through this. Which lenders lend on a development which has just started please? Should we put one property into a company or four separate units?

We bought it in joint names personally with a mortgage. We have done the footings and part of the build.

THE ANSWER

If you want to keep a property converted into four flats that will be a commercial mortgage and it will be possible to keep the property on a single title post conversion.

One point to clarify; presumably you have obtained planning permission to convert into four flats, or you bought the property with existing planning permission? No mortgage lender will touch an illegal conversion with a bargepole and it is the first thing any lender’s surveyor checks with the local planning office when valuing converted flats.

Commercial mortgage...