Advice on joining 2 flats together: mortgage

[Ellie78]

We are hoping to put 2 flats we own together and renovate to form c 1500sq feet family home.

The value of the property would be significantly higher than the purchase price both properties are mortgaged for

I have no clue as to how to deal with the mortgage aspect of the deal and have no idea how to start: we need to go from 2 mortgages to 1, and borrow more money to fund the renovation (c. 70,000).

Mortgage brokers I've spoken to seem to have no clue or experience in this relatively complex operation and I have no idea who to talk to.

Anyone done this and can offer advice as to mortgage issues?

[KidKruger]

Problem is you're risking the value of each asset to achieve the conversion and effectively leaving the lenders with a property deed for something that'll be part-owned by another lender.

[Ellie78]

I don't think you legally can join two properties with two mortgages. We have to reduce it to one mortgage (ie pay off the smaller - 60k- one) to integrate them. The issue is more how the legalities have to be dealt with in order to get a mortgage, and how the new value is reflected. It looks to me like we would have to get a bridging loan to do the renovation and physically put them together- otherwise how is a new lender - one looking for the first time at this new more valuable property going to be able to value it.

I could really do with chatting to someone with experience but brokers have been clueless about the mechanics from the mortgage point of view.

It's going to cost us c. 130k to pay off mortgage and renovate (which includes small extension of basement). But it will give us same floor space as house, which we couldn't afford by any stretch of the imagination ...

[simonethebeaver]

It can be done - my neighbours did it. From what I remember, they were able to remortgage once the work was done and the council had reclassified it as a single dwelling. It was a pain though and they used a specialist broker. I can ask them who it was and PM you?

[Ellie78]

Simonetb that would be amazing!!!!!

Thanks so much.

[Jeremy]

We were looking at this a few years ago. Would you be able to remortgage one and pay off the other? If so, it should be fairly straightforward.

[ianr]

Aren't the only liens that the mortgagees currently have solely on the flat leaseholds that you're planning to demolish and abolish? I don't think they'd like that. My inexpert guess is that both of those mortgages would have to be cleared, and replaced by one to one or both of you as redeveloping freeholder. The new lender would presumably need to be satisfied that any loan could be recovered, even factoring in whatever probability there was of the approved redevelopment not being properly completed. I'd be talking to a lawyer first, as a one-stop advice centre on both correct legal process and the practicalities. They'll presumably have seen plenty of cases of purchase for redevelopment; may even be able to recommend particular lenders, brokers, or valuers.

[Jeremy]

ianr, yeah I'm sure a lender wouldn't be happy about effectively abloshing their collateral! When we were looking at it, it seemed like the way to go was to pay off one of the mortgages, then on the mortgaged property you will need a deed of substituted security - i.e. substituting the flat for the whole house on the mortgage agreement. This is a fairly common procedure.

Also, bear in mind that things like switching utilities to a single meter are surprisingly complicated. And of course you'll need to own the freehold first.

[womanofdulwich]

You will need to change the title deeds etc and need freeholders consent . Speak to a solicitor first about this.

[ianr]

And any planning law requirements?