The clients were a husband and wife who had a large dwelling, which occupied the first and second floor of a period London townhouse. Several years after they moved in, the opportunity arose for them to purchase the property immediately below them. This appealed to them, as it meant they could control who occupied the property and they would be fully in control of the company that held the freehold to the building. They successfully purchased the flat beneath them using a BTL mortgage facility with Barclays, the same lender they had used to secure their main residence.
At this point, the clients had a residential mortgage for £280k and a BTL mortgage on the downstairs apartment for £450k, with a combined valuation of circa £1.6m. As more time went by, tenants came and went, and the clients started a family. They were now short on space in their residence and, as the tenants below had moved out, they decided they would use this space rather than re-let it.
It was at this point that they approached Specialist Mortgages. Their plan was to change the property back into a single residential dwelling, and they wanted to refinance their existing residential and BTL mortgages into a single residential mortgage. They then wished to make extensive improvements to the combined property.
This proved to be quite a challenging exercise. At the time, each property was on a leasehold with a share of the freehold, so to make this work the leaseholds would have to be dissolved and the new lender would then have a single charge against the freehold. However, Barclays was not about to grant permission for the leaseholds to be dissolved sequentially, as this would have affected their security. So we needed to find a lender that would be prepared to produce an offer on the basis of there being a single freehold dwelling, but that could not be used until all the title changes had happened.
On the face of it, this looked like an impossible challenge. It appeared that the only solution would involve costly bridging finance to remove the existing mortgages, make the necessary structural changes to the property, and then refinance onto a residential mortgage to clear the bridging.
“The clients were delighted, as they secured an excellent residential rate and were able to enjoy their home”
However, after presenting a detailed proposal to a specialist underwriter at Santander, we secured an agreement that they could consider lending. The proviso being that all the necessary works had to be completed to bring the property back into a single dwelling before their surveyors went out to inspect the property. This would involve the removal of the kitchen from the downstairs apartment and the unification of the heating and electrical systems.
The clients had a joint income of around £600k and had put aside savings of £300k for alterations, so there was no requirement to finance these changes; they simply wanted to get to a position of having a single residential mortgage. We also secured pre-agreement from Santander’s legal team that they would be prepared to issue an offer that could only be used once the necessary title changes had been made, thereby not leaving them in a vulnerable position.
As a lender, Santander is not the obvious choice for these types of lending complications. However, by using the contacts that we had established within the lender, and by presenting a sound proposition, they were happy to assist us in placing the case.
The clients were delighted, as they secured an excellent residential rate and were able to enjoy their home in its new configuration, without the costs that would have been associated with a bridging route.
