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gav05

Mortgage help

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Anyone able to give me some advice on how to get a mortgage on a commercial property in this case a pub. We have made a offer on it and been accepted. It has commercial to residential change of use planning approval. So we thought sell ours and buy that and do up and develop as planned. This is where it all becomes a mine field. No one will give a residential mortgage on it as it's still a commercial property and no one will give a commercial mortgage on it as it's de- licenced and not viable as a business and we don't want to run it. So it seems the only way to do it is with a bridging finance mortgage but based on 30% deposit and high interest plus the fact you can only bridge for one year this doesn't work either.as not able to secure the required gross development valve residential mortgage required  on it. Anyone who can shed any light on how this frustrating stalemate of impossible lending is doable? I would appreciate any advice. As no one can tell me at what point it changes its use. Regards Gavin

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48 minutes ago, gav05 said:

Anyone able to give me some advice on how to get a mortgage on a commercial property in this case a pub. We have made a offer on it and been accepted. It has commercial to residential change of use planning approval. So we thought sell ours and buy that and do up and develop as planned. This is where it all becomes a mine field. No one will give a residential mortgage on it as it's still a commercial property and no one will give a commercial mortgage on it as it's de- licenced and not viable as a business and we don't want to run it. So it seems the only way to do it is with a bridging finance mortgage but based on 30% deposit and high interest plus the fact you can only bridge for one year this doesn't work either.as not able to secure the required gross development valve residential mortgage required  on it. Anyone who can shed any light on how this frustrating stalemate of impossible lending is doable? I would appreciate any advice. As no one can tell me at what point it changes its use. Regards Gavin

You need development finance, usually lenders need a big deposit as they are expecting you to effectively have a big slug of cash to buy the existing property and it’s deemed high risk..

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Cheers. My thinking too. Even the experts can't advise me. Local planning department said the minute a meaningful start is made its enough to class as residential. But mortgage lenders saying needs to be completed and building regs signed off. but wouldn't say to what constitutes as complete i.e no paint on walls and not plastered or Finnished but livable in might be my style but apparently to much of a building site look and it's not going to get the correct valuation. Problem is they are all happy to come try value it at £350-500 each visit but then tick the commercial box and still want there Money. It's a joke as it seams like unless you have a big lump of cash to be able to buy it outright purchase then there is no answer. Even the special lenders unsure on its status technically it's not a pub but it's not quite a house as it's 50-50 at min but not viable for either. Iv now got 6 weeks to sort this out. !!!

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 Still hoping that there is a special lender for such a property. But after 10 or so lengthy phone calls with brokers it's seaming less likely. 

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Do you have an idea of timescale before it becomes a residential property, eg building regs etc? If you can get that completed quickly then bridging finance might be a tool you can use. The rates are high but it can be really helpful for getting you out of situations like this. But I'd want to be sure of timescales and have confirmation that the property is mortgageable before going forward. Good luck.

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Self build mortgage expert is what you need. Buildstore is where we send most of our enquiries that need this that don’t want to do bridging. Not saying it’s a given but if you don’t want bridging rates, is your only option. But still expect c5% PA until complete. Yes there’s higher rates on bridging but it will be swifter finance and if you spend x and make 2x then will make the interest seem a bit more palatable. 

Gibby

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1 hour ago, gav05 said:

Cheers. My thinking too. Even the experts can't advise me. Local planning department said the minute a meaningful start is made its enough to class as residential. But mortgage lenders saying needs to be completed and building regs signed off. but wouldn't say to what constitutes as complete i.e no paint on walls and not plastered or Finnished but livable in might be my style but apparently to much of a building site look and it's not going to get the correct valuation. Problem is they are all happy to come try value it at £350-500 each visit but then tick the commercial box and still want there Money. It's a joke as it seams like unless you have a big lump of cash to be able to buy it outright purchase then there is no answer. Even the special lenders unsure on its status technically it's not a pub but it's not quite a house as it's 50-50 at min but not viable for either. Iv now got 6 weeks to sort this out. !!!

Do you have a breakdown of whats needed for the refurb to pass reg's? ie fire and insulation requirements? If its 30min fire, the regs will probably require a 3mm coat of plaster on top of the fireboard to pass! you could get away without paint for regs, but thats about it! I would imagine as your changing from commercial to residential you will have to update everything to new regs? If upstairs is already residential, you may get away with "existing" in these areas? If you get to the point where you are doing the work, you don't have to use the council building inspector for regs, you can use private building inspectors! (who in my experience aren't as anal!)

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30 minutes ago, PhilT said:

Do you have an idea of timescale before it becomes a residential property, eg building regs etc? If you can get that completed quickly then bridging finance might be a tool you can use. The rates are high but it can be really helpful for getting you out of situations like this. But I'd want to be sure of timescales and have confirmation that the property is mortgageable before going forward. Good luck.

This is what I wanted but as said not available as still can't secure the mortgage based on the gross development valve. Apparently 120k isn't enough profit security. And it is only bridged for 12 months that's plenty of time to do the works but after that the mortgage for it would be more than I could afford. But if could buy it at agreed price and do the work bit by bit over 3 years I could afford it. I'm going to have to keep trying with brokers and hope I can find one that knows a way around it. 

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21 minutes ago, silver pigeon69 said:

Do you have a breakdown of whats needed for the refurb to pass reg's? ie fire and insulation requirements? If its 30min fire, the regs will probably require a 3mm coat of plaster on top of the fireboard to pass! you could get away without paint for regs, but thats about it! I would imagine as your changing from commercial to residential you will have to update everything to new regs? If upstairs is already residential, you may get away with "existing" in these areas? If you get to the point where you are doing the work, you don't have to use the council building inspector for regs, you can use private building inspectors! (who in my experience aren't as anal!)

Yes I have got a breakdown off all works I'm in a trade myself and have coated the whole project. But I can get a commercial mortgage or a residential mortgage or bridging finance. Iv read about a self build mortgage apparently it can be used for renovations. Problem is it's completely livable in as is just paint it and new carpets and move in. Unfortunately not that simple as the change of use planning means it needs to be turned into the plans that were submitted. These are different to its current layout and it needs 100k to do the works but I've not got that laying about so I've the plan was to buy it move in and then renovate room by room over time. But thats the issues no lenders available based on that plan. Unless there is a magic loop hole around it. 

It is a de- licenced pub with residential change of use planning. So no longer classes as commercial to a broker 

But it's not converted to the plans so it's not the residential property either. 

It's to expensive to be a average cash buyer property and is not profitable for a developer as it's only a single family home conversion. It's stuck in no man's land and thats why it's still for sale 5 years on 

Yet if I could get planning on it exactly as it is then just remove the bar and all the pub related parts then it would be suitable for residential mortgage as would be signed off. Unfortunately planning not possible to change back as in a conservation area. Back to the drawing board as they say. 

 

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More than likely you will find the only way is "personal fiance" then when done remortgage and repay your self....am about to start a project (500k) for a client who is haveing to do this despite having access to many mortgage free rental properties as secutity........

Or borrow at 20% plus interest from specialist lenders....."fundsnetworks" etc

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5 minutes ago, gav05 said:

Yes I have got a breakdown off all works I'm in a trade myself and have coated the whole project. But I can get a commercial mortgage or a residential mortgage or bridging finance. Iv read about a self build mortgage apparently it can be used for renovations. Problem is it's completely livable in as is just paint it and new carpets and move in. Unfortunately not that simple as the change of use planning means it needs to be turned into the plans that were submitted. These are different to its current layout and it needs 100k to do the works but I've not got that laying about so I've the plan was to buy it move in and then renovate room by room over time. But thats the issues no lenders available based on that plan. Unless there is a magic loop hole around it. 

It is a de- licenced pub with residential change of use planning. So no longer classes as commercial to a broker 

But it's not converted to the plans so it's not the residential property either. 

It's to expensive to be a average cash buyer property and is not profitable for a developer as it's only a single family home conversion. It's stuck in no man's land and thats why it's still for sale 5 years on 

Yet if I could get planning on it exactly as it is then just remove the bar and all the pub related parts then it would be suitable for residential mortgage as would be signed off. Unfortunately planning not possible to change back as in a conservation area. Back to the drawing board as they say. 

 

I would approach the sellers and (seeing as its been for sale for 5 yrs) see if they will extend the 6 week completion to 9 weeks and try and submit new plans?

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We found ourselves in EXACTLY the same situation as you two years ago. We actually bought a pub cash and got planning for change of use but we hen needed a mortgage to renovate it. Then the fun started!

We looked at bridging loans, development loans etc. Everything was looking very expensive and we danced around in the same circle of “We can’t help, it’s a pub, yes I realise it’s got change of use but it doesn’t look like a house”. 

In the end we were able to get a standard residential mortgage from Nationwide no problem.

The only thing our broker told us to do before the valuation was to ensure ALL signage (including all food hygiene stickers etc) was taken down and to make it look a little less “pubby”!

I spent a weekend clearing out all the restaurant tables and chairs and sticking sofas in place. Hung family photos everywhere, kids toys in the corner, softened the commercial kitchen a bit etc.

It was still basically a pub when the surveyor came around, who has a 6m long bar in their dining room?! But after I thrust a copy of the planning permission at him along with three different estate agent valuations forecasting the finished value he was happy.

Nationwide wanted to see a very brief breakdown of renovation costs and then they signed it off. Job done.

No idea who has told you it’s not residential until the renovation is done either; or that it needs to end up looking like the plans submitted to planning. Our planning application didn’t even need internal or external plans. Ours is in a conservation area too.

Edited by Munzy

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I have a client who has been through this.

Broadly, if it's a pub the high street lenders don't recognise it or understand it as anything other than a pub - I can only assume that their computer systems operate on a drop down menu and it either fits in a slot or it doesn't.

He originally bought using a commercial mortgage from Nationwide (when it was a trading pub), but now the pub is not sustainable as a pub he is looking to develop. For the last year it has been a 10 room fully occupied HMO.

As a pub the building is valued at £350k, as a single domestic residence it's £850k, as flats (which is where he is going) the sky is the limit.

Long story short he got private lending (on a bridger at 10%) but he's happy because he stole it when he bought it 2 years ago for £300k and in the meantime it is printing money as an HMO.

He's looking at finding another failing pub (and there are plenty) but in the right area - anyone who knows the ropes and has some cash, well a failed pub in the right town is the last place to get an earn in the development game.

 

 

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12 minutes ago, Munzy said:

We found ourselves in EXACTLY the same situation as you two years ago. We actually bought a pub cash and got planning for change of use but we hen needed a mortgage to renovate it. Then the fun started!

We looked at bridging loans, development loans etc. Everything was looking very expensive and we danced around in the same circle of “We can’t help, it’s a pub, yes I realise it’s got change of use but it doesn’t look like a house”. 

In the end we were able to get a standard residential mortgage from Nationwide no problem.

The only thing our broker told us to do before the valuation was to ensure ALL signage (including all food hygiene stickers etc) was taken down and to make it look a little less “pubby”!

I spent a weekend clearing out all the restaurant tables and chairs and sticking sofas in place. Hung family photos everywhere, kids toys in the corner, softened the commercial kitchen a bit etc.

It was still basically a pub when the surveyor came around, who has a 6m long bar in their dining room?! But after I thrust a copy of the planning permission at him along with three different estate agent valuations forecasting the finished value he was happy.

Nationwide wanted to see a very brief breakdown of renovation costs and then they signed it off. Job done.

No idea who has told you it’s not residential until the renovation is done either; or that it needs to end up looking like the plans submitted to planning. Our planning application didn’t even need internal or external plans. Ours is in a conservation area too.

Thanks that makes me hopefull. 

They make it alot harder than you would think. 

I wish I could afford to buy it outright but unfortunately not in a position to. 

The issue seams to be risk factor. Ie if it all goes wrong not that it will but say i default the mortgage and there left with a half refurbished pub to sell. And that might not get the same Value as mortgage.

The brokers are the ones that told me all building work would have to be done to the plans and the building signed off to get a residential. Think this is because there is quite a lot of existing structure that gets knocked down. And new walls and rooms get re-built so hard to value as what is there isn't what will be there when all Finnished. And they wouldn't be able to value it off drawings. And the valuers and to take proposed plans as gospel because we might not actually do it and then they have over lent.they all seam to work on hypothetical scenario's. 

I have just had a message back from a broker and they referred to nationwide and Skipton as a lender that do consider such property so feeling a little more hopefull now. 

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Stick with it!

Our building looked like a pub (minus the signage) when we approached Nationwide. They understood completely that it was no longer a commercial property following the granting of planning permission. 

They gave us a residential mortgage on it knowing full well we were about to rip it apart. Not sure what your figures look like but as a guide the LTV (value being as it stood at the time as a closed down pub) was 50%. If you are looking to borrow more perhaps the risk for the lender would make it harder.

If you get stuck I am more than happy to put you in touch with our broker; I can tell him to refer to our application as a guide to approaching yours.

 

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