Posted on 30 January 2012 by Kathryn
We purchased a large u shaped steading in Aberdeen several years ago. One side of the u was unconverted and we have recently obtained planning permission to convert this side in to a 4 bed house ( no restrictions), using existing entrances but also creating one new one.
Our mortgage lender Nationwide refuse to lend the money as they say it is a commercial venture/seperate development to our house and we cant have 2 mortgages on one property. They are unable to lend on commercial developments. The Halifax however would take over our current Nationwide mortgage and lend the full amount for the unconverted side of the house as part of a single new mortgage! Our problem is we will have to pay £6.000 to the Nationwide to 'buy out' of our current mortgage. This is galling given their unhelpfulness. How can two major lenders see things so differently. We do not wish to split the deeds fo a number of reasons. What do you advise?
Halifax are taking a more commercial view of your plans and have presumably decided that the total amount you wish to borrow is more than adequately secured by the value of your property. They are known for funding self build properties and conversions, something which the more prudent Nationwide is not. Some might say that this more open attitude to risk is what got them into the situation they are now in?
You state that you do not wish to split the title to your property and so the only way to fund this project will be to approach your bank or another lender for a secured loan. This will have a higher interest rate than usual because in terms of who gets paid if you default and your house is repossessed it will rank behind Nationwide. The greater risk of the lender losing money is therefore reflected in the rate you pay. You will also find that in addition to the fees for setting up the new loan Nationwide are likely to make a charge for completing any secured loan questionnaire they receive.
The alternative to this is to split the title and whilst you have your reasons for not wanting to do this it might be the best way forward. Nationwide would have to agree to the split because the current mortgage is secured on the whole of the property and you are effectively taking away half of this and again there will be an administration charge for this. So long as the existing homes value is sufficient to cover your Nationwide mortgage it would mean you would not have to pay the early repayment charge and it would leave you with an unencumbered property on which to raise the money required for the conversion.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to help you find the right solution for your situation.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.