Hi,
My husband and I currently own a 3 bed semi and have a residential mortgage on the property. In the past year, we have half erected an extension over the attached garage. The extension has a roof and is about to be rendered and have windows put in. When completed, it would make our house a 5 bed property. Over the winter we had a brainwave of seeing if we could split the house into two 3 bed properties sitting side by side. We had planning permission approved for this in March, and now need to remortgage in order to get the funds released to finish the works.
We hold a £125k mortgage on the property. As a 3 bed, it is worth in the region of £230k. If we split the property, one house (14) would be worth £200k and the other (14a) worth £220k. We have calculated we would need £30k to do the works of splitting the house (new kitchens, bathrooms, plastering, decorating, new utilities etc). My husband is a builder so would do the works himself.
The amount we therefore need to remortgage for is £155-160k (70% LTV if house is currently worth £230k).
Here is where it gets tricky... Once the houses are split (hopefully by early 2015), we plan to sell the original property (14) and move into the new property (14a). That way we will avoid any CGT liability. We would remortgage again at this point. The title deeds will therefore need to be split once the works are completed, however the Land Registry says they will need written consent from whomever has a charge on the property in order to split the deeds. If we go for a standard residential remortgage at this point, we get the impression that they won't consent to us splitting the asset (our current mortgage provider has said no). Our IFA says that we would simply have to split the deeds the same day that we refinance at the end of the project, but I'm confused as to how this could be if somebody always has a charge on the property at every step along the way?
In conversation with development finance broker Buildstore, they have told us that what we need is "short term bridging finance". This will allow us to pay off our current mortgage provider and provide us with the extra needed to finish the works. At the end of a 12 month period after works are completed, we would then split the deeds - the Buildstore rep said the bridging loan company would have no problem consenting to splitting the title as by doing so will enable them to be paid back. We would then sell 14 and move into 14a and have no mortgage left.
The only issue is that bridging finance seems VERY expensive, with interest in the region of 1% per month (as opposed to typical mortgage rate of 4% APR) as well as hefty/exit sign-up fees.
My (long winded) question is this... Despite being a lot more expensive, is bridging finance the only real solution to this? If we went for a simple residential remortgage instead, how would we get around the splitting the title deeds issue?
Apologies if the above is TMI or rather nonsensical... I have a constant headache from all the different options and feel like I need impartial advice from people who aren't trying to sell me something! Oh, and another baby due in September... AAAH!
Thanks all.
My husband and I currently own a 3 bed semi and have a residential mortgage on the property. In the past year, we have half erected an extension over the attached garage. The extension has a roof and is about to be rendered and have windows put in. When completed, it would make our house a 5 bed property. Over the winter we had a brainwave of seeing if we could split the house into two 3 bed properties sitting side by side. We had planning permission approved for this in March, and now need to remortgage in order to get the funds released to finish the works.
We hold a £125k mortgage on the property. As a 3 bed, it is worth in the region of £230k. If we split the property, one house (14) would be worth £200k and the other (14a) worth £220k. We have calculated we would need £30k to do the works of splitting the house (new kitchens, bathrooms, plastering, decorating, new utilities etc). My husband is a builder so would do the works himself.
The amount we therefore need to remortgage for is £155-160k (70% LTV if house is currently worth £230k).
Here is where it gets tricky... Once the houses are split (hopefully by early 2015), we plan to sell the original property (14) and move into the new property (14a). That way we will avoid any CGT liability. We would remortgage again at this point. The title deeds will therefore need to be split once the works are completed, however the Land Registry says they will need written consent from whomever has a charge on the property in order to split the deeds. If we go for a standard residential remortgage at this point, we get the impression that they won't consent to us splitting the asset (our current mortgage provider has said no). Our IFA says that we would simply have to split the deeds the same day that we refinance at the end of the project, but I'm confused as to how this could be if somebody always has a charge on the property at every step along the way?
In conversation with development finance broker Buildstore, they have told us that what we need is "short term bridging finance". This will allow us to pay off our current mortgage provider and provide us with the extra needed to finish the works. At the end of a 12 month period after works are completed, we would then split the deeds - the Buildstore rep said the bridging loan company would have no problem consenting to splitting the title as by doing so will enable them to be paid back. We would then sell 14 and move into 14a and have no mortgage left.
The only issue is that bridging finance seems VERY expensive, with interest in the region of 1% per month (as opposed to typical mortgage rate of 4% APR) as well as hefty/exit sign-up fees.
My (long winded) question is this... Despite being a lot more expensive, is bridging finance the only real solution to this? If we went for a simple residential remortgage instead, how would we get around the splitting the title deeds issue?
Apologies if the above is TMI or rather nonsensical... I have a constant headache from all the different options and feel like I need impartial advice from people who aren't trying to sell me something! Oh, and another baby due in September... AAAH!
Thanks all.