Updating post from Reddit.
Hi, my boyfriend and I are first time buyers and are in the process of buying a flat which is in a terrace which also has a commercial property in in London. ( Estate agents has half of the ground floor, the other half is our unit with the rest of the flat on the lower ground.)
The flat is gorgeous and is everything we would want in a flat, anything of similar quality and size but not in a unit shared with a commercial property would not be possible for us due to the Lisa cap.
We had our first mortgage denied after the survey due to resalability we are currently working with a mortgage advisor and have decided to try our luck with another highstreet lender.
I am acutely aware that this property is a risk and in 4 years (we are thinking we will move up to Birmingham around this time to start a family etc as this is where my partner is from) when we want to sell the flat we could face real difficulty in selling especially if the estate agents were to change to a more undesirable business.
My question is, if we find ourselves in this situation what would be the feasibility of renting out the property? I am aware we would need permission from the freeholder... Would we need to change our mortgage to a btl? How easy would this be and is there anything affordabilty wise we should consider?
My thoughts would be to rent out the property in London to cover the mortgage then rent ourselves in Birmingham where rents are cheaper?
Renting is difficult, time consuming and complex: if you put real time and effort in, then it can work. But it isn’t simple and fraught with complexity.
There are always some people who make it work, get good tenants, but by and large I think you will wish you didn’t bother.
If you are struggling to get a mortgage then so will anyone else: plus rules can change.
4 years isn’t a long time; I would be tempted to rent and then buy in Birmingham.
It is normally impossible or very expensive to find a mortgage for flats above or close to commercial property. You have already found out that one won't lend but I think you will ultimately find yourself wasting a lot of time with the process. Find an independent mortgage advisor that has knowledge of this and if they know of any lenders. Personally I wouldn't touch this as it sounds a nightmare. Even if you bought this insurance will be stupidly high and also hard to find.
The way I'd look at it is like this. You've had a mortgage denied for a fair reason from people skilled and with industry know how.
I'd take that as a warning and walk away.
If you really were looking at renting you'd need to get a buy to let mortgage or fully buy out the flat as you say which won't necessarily be easy.
Then you have to consider the new letting regulations and the decline of rented accommodation from private landlords in general, it's getting harder and is rarely worth it.
Move on and don't look back
Ask for ‘consent to let’ from bank, when ready to rent out the flat
Don’t buy if you want to move again in 4 years.
I appreciate the time for a response but there are numerous reasons why buying now and selling in 4 years makes financial sense for us - provided we find the right property. Thanks :)
Also bare in mind the higher rate of stamp duty on your 2nd purchase in 4 years time. Good luck!
You’ll have to pay the higher rate of SDLT, currently an extra 5%, when you buy a new home in Birmingham if you keep the flat.
You will have to inform your mortgage lender if you rent it out and potentially change to a BtL mortgage, which you might not be able to get.