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  • Mortgages & Finance

    Buying flat with short let

    Hi all,

    I'm just about to start on my property journey; I bought my first flat a few years ago and about to sell it in order to release equity, plan is to downsize to a smaller 1/2 bed in need of refurbishment, and use the remainder to buy a btl flat with 25% down. Rinse and repeat every couple of years or so.

    I've seen some decent looking properties in my area (Essex) going cheap as they have a short lease in the 60 year range, my questions are; has anyone bought a flat where they've got the seller to issue a section 42 to extend the lease and then re-assign rights to do so to the buyer? How much more complicated does it make the whole process? Is it worth the hassle?

    Also, would the standard mortgage companies accept this and give you a normal deal or would you still have to go for a specialist mortgage provider who deals with short leases?

    Or should I just steer clear entirely?

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    HI Jamie

    I cannot comment on the ease of a lease extension or an assignment of a Section 42.  What I can tell you is that when it comes to a mortgage, the lender will consider the lease term as it will be on completion, not what it will be in due course.  A 60 year lease would preclude you from a large number of lenders, but also, potentially, could the properties condition if it needs a refurb prior to being lettable.

    Its worth running a couple of real life examples past a broker to see how the financing costs would land, taking into account the lease term and the property condition - we would be happy to do this for you if it would help.

    Is this any use?

    Jeni

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    Mortgages For Business is a commercial partner of Property Tribes.

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    Hi Jamie,

    Fellow Essex lad here (don't worry, I don't have the tan!)

    As above but I thought I'd put my personal opinion in too as;

    If it were me in your position, I'd steer clear, there are plenty of properties on the market and I would look into getting hold of an 'easier' property to cut my teeth on.  I would look for a simple one to start with, nice value, location, rent income etc etc and see what I could gain from this. Its a long game and if I were also working/employed, the rental income profit could be saved as a buffer until I felt comfortable to step the game up.  I personally think it would be better to have a solid backing behind me before I attempt a more difficult purchase.  However, I do understand how the price can tempt Wink

    I work based from Colchester and when I wanted to look into buying a decent size family house, I looked in the villages surrounding the main town, literally 3/4 of the price and, in my opinion, a better place to be as the family grows Smile

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    Financial Consultant working with Property Tribes Financial Services.

    BTL Specialists.

    Always cover your debts, don't leave them for your loved ones to pick up. Ask me how - austyn@ptfs.co.uk     07500 871209

    Thanks both - yeah sounds like its not worth the hassle unless cash buyer etc. this would be my place to live by the way, not the rental, Probably better to get a refurb project with a decent lease and pay a bit more

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    All depends on the management fees? The price, is it cheaper against others in the area and if so, by how much??  Some of the best deals I have done have been short lease,  LH. Other comments are totally correct, but don't completely dismiss it. Soon as low lease and LH are mentioned in the same sentence on this forum everyone states "stay away". Don't always follow the masses..

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    HI Studio - did you extend during the buying process or after? Were you a cash buyer?


    Cheers

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    Unfortunately the current the vendor wouldn't initiate the process, however after 2 years of ownership you can do this anyway. No I got a mortgage, there was only 62 year left on the lease. Biggest thing is scrutinize the accounts and the service charge etc.

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    Ok thanks - did you have to use a broker to get a specialist mortgage? Yep got to watch out for the charges )

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    Yes I used Aldermore. But there are others, such as Kent Reliance

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    They do up to 80% LTV, however I would ideally stay below 70% if you can

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