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Am I correct in thinking that if I were to buy a three bed semi(in need of serious modernisation)on a residential mortgage and convert it into a 5 bed HMO, I could then refinance it on a commercial mortgage? Or does it need more rooms to be classed as a commercial let?
Many thanks in advance!
I've no idea. However, the go-to person for this type of question and advice is Lisa Orme of Keys mortgages, both of whom can be found on Facebook.
She is extremely knowledgeable on this subject.
What you suggest would be classed as mortgage fraud - please don't even think of it as you would land yourself in hot water.
A residential mortgage is for your own home ONLY, a BTL mortgage is for a BTL single let ONLY and an HMO mortgage is just for HMOs - these categories of mortgage are not interchangeable, it has to be the right mortgage for the right purpose.
Added to that, a mortgage for a BTL or an HMO is solely for a property which is up an running for the intended purpose and already bringing in rent.
No mortgage provider would ever agree to provide a mortgage for a property needing refurbishment - that purchase would have to be with cash, with a bridging loan or with a special refurbishment mortgage (Shawbrook do one, not sure whether there are others).
It is vital that you get advice from a good mortgage advisor who can talk you through your options (not just a mortgage broker as they are just salespeople who may not have the necessary knowledge).
I agree that Lisa Orme is good and I have also had brilliant advice recently from John Constant at HD consultants who work with Property Tribes Financial Services.
All comments are made in good faith and are given to the best of my knowledge and experience but I would advise you to consult an expert before making important decisions and I accept no liability for comments made.
Agreed. I missed the Resi bit!
Thank you so much for the endorsement Anne. And you are absolutely spot on with the rest of your post too.
There are options for refurbishment of a property with a standard/HMO btl mortgage; some lenders will allow a short period for refurbishment, so if you can get that done say within 3-4 weeks, that will be acceptable. If you are going to need more time, you may have to consider bridging. It may be possible to secure bridging on other property as well as the intended property thereby lowering the LTV and therefore the cost.
One particular lender has a bridge to let product that allows you to bridge, refurbish and then move to a btl product with the same lender, thereby avoiding 6 months ownership issues.
As ever, your personal circumstances will need to be taken into account before we can make specific recommendations.
BTL's, residential mortgages, bridging, life cover and estate planning
For Commercial Finance, complex BTL and HMO funding, development finance, international and expat mortgages, and portfolio BTL mortgage services Assured Funding website.
Telephone: 07751042485 01206 654444
And thank you you for your reply!
I have mislead you, I’m sorry. The purchase of the house would actually be with cash. I have some cash of my own and an investor at the ready. I have so many deals going around my head atm that I’m getting them mixed up!!
My main question is whether a commercial mortgage can be granted on a 5 room HMO? I’ve been advised how to work out a commercial valuation based on the number of rooms and just need to know if I’ve done the maths right?
3 bed house @£140,000
Refurb and add the two rooms.
5 rooms @£500 per month each= £2500x12=£30,000-20%=£24,000x10=£240,000
Then I would look to pay off my investor with the refinancing.
Does this make sense or have I been mislead!!!?
Contact John Constant at https://www.propertytribesfinancialservic...contact-us for the answer
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