Location: Bristol

Loan Amount: £900,000

Finance Category: Commercial Property Finance

The Story

An existing client had recently purchased a semi-commercial property at auction. It consisted of 2 flats above a retail unit, all on one freehold. Our client had gained planning to change the 2 flats into a 10 bed HMO and retain the commercial element. Funding was needed at 75% loan to value on the whole freehold.

The Challenge

One of the areas of the market which could be better served is the funding options for semi-commercial property. None of the main buy-to-let lenders will lend where there is an element of commercial, no matter how small that commercial element is. The challenge in this scenario was in finding a solution that offered our client the most cost-effective solution. Should we split title and mortgage the residential and commercial parts separately or should we finance the property as one freehold unit, both methods had their pros and cons.

The Solution

Having considered splitting the title and the dual legal and valuation costs we decided that route was not going to allow the client to get the maximum loan out of the property and that it was not cost effective. Using our contacts at one of the commercial banks we came up with a bespoke semi-commercial product offering for this particular property. The lender would offer a hybrid rate which sat in between their published residential and commercial rates. As important was the fact that the lender was prepared to work off of the investment valuation for the HMO, this allowed us to achieve a slightly higher loan amount than if we had used a bricks and mortar (vacant possession) valuation. This was a case of who you know and what you know combining to deliver a bespoke mortgage solution for our client’s semi-commercial HMO property.

For more information on HMO mortgages or to speak to us about general mortgage advice, please contact a member of the Fox Davidson team today, email enquiry@foxdavidson.co.uk or call us on 0117 989 7950.