Posted on 31 January 2011 by Graham
I am renovating a property for myself, wife and son. Part of the house would be self contained for my sister in law to live in. ie it would have a separate outside door, kitchen, lounge, bedrooms, but with a door through to our part if necessary. My Q is if I needed to take out a mortage in the future, would lenders not like the idea of this dwelling as it would not be a separate title deed and she would not be on the mortgage just contributing to the household bills.
If an issue, is there a way around this by say making her a "live in " tenant?
In my experience this will severely restrict the number of Lenders willing to consider a mortgage secured on the property. The main reason given for this is they feel it will make the property more difficult to sell in the event of repossession and the occupier of the self contained section could have rights of occupation which would make a sale near impossible. For this reason I do not think that making her a "live in" tenant would be the answer.
Would it be possible to split the title of the property? It may then be possible to raise a mortgage on your part without worrying about the other. This will very much depend on the property and its lay out and may not be the answer at all. The value of each part may be insufficient to support the amount you wish to borrow or the actual title may prove a problem if for instance you were to end up with a leasehold house or freehold flat.
The few Lenders that will consider this situation would most certainly want your Sister in Law to waive her rights of occupation in their favour and would usually do this by getting her to sign a Consent to Mortgage as part of the legal work prior to releasing any funds.
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.