Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
May I clarify with you whether the granny flat has a self contained bathroom and kitchen please?
Thanks. Could you kindly clarify what you mean by the area goes on from the main entrance please? Is this a self-contained flat behind a separate door or is it simply rooms within your property?
thank you. The reasons for my above questions is for a separate issue to the one you initially ask about. if you have a separate area which is self-contained within your property which contains both the kitchen and bathroom facilities, the local authority has powers to deem this to be a separate residence for the purposes of Council tax and assess a separate Council tax charge on that area of your property. This can leave you paying both Council tax for your main property but also an additional bill, usually a or B rating, in relation to the separate granny annexe. For this reason, if possible, it is wise to avoid the attention of the local authority. if the local authority were to ever find out and try to assess a separate Council tax bill, the position can be rectified usually by removing the kitchen. However in relation to your main question...
notwithstanding the above comments, providing the business use you propose for the property is incidental to your main use of the property as a residential property which you living
Sorry I hit return by mistake... I will repost...
notwithstanding the above comments, providing the business use you propose for the property is incidental to your main use of the property as a residential property which you live in, planning permission for change of use is not required. Planning permission for change of use to business use is required when use of your property is no longer incidental to your main use as residential constitutes your main use of the property with residential becoming a secondary use. This is usually determined upon the percentage space that is being used for business purposes whereby if this is more than 50%, the property would be deemed to be being used the business and a change of use application required. If the area you're using for business purposes is less than 50% of the overall area of the property, the use would typically be deemed to be "ancillary use" and therefore no change of use application is required.
is there anything above I can clarify for you?
Does the above answer all your questions or is there anything I can clarify or help you with any further?
if you were to proceed as you propose and split the property formerly into two separate dwellings then this would once you have completed the process require your existing mortgage to be restricted to the dwelling you lifting and if you needed further finance, a separate mortgage being taken out on the buy to let part of the property. If you need finance chairing the process of the conversion, you can look at a remortgage with a development finance product such as those available from the broker Buildstore or similar. as you say, this type of finance releases payments in stages so as to minimise the amount of capital you were borrowing or at once.
once the conversion had been completed, the development finance loan can typically be converted into a standard residential mortgage and if needed, and additional buy to let mortgage for the downstairs buy to let part pf the property.
is there anything else I can help you with?
the development finance loan is made available to you with security against the property allowing you to draw down the loan in stages as the word completes. The idea being that you any pay interest on each tranche that you draw down so that you do not pay interest on the whole amount from day one. you can then use this money to pay for the works you wish to complete the property. Once the works are complete, you will from what you say then have two separate properties which you can independently mortgage using a residential mortgage and a buy to let mortgage. You can use the money from your new residential mortgage and buy to let mortgage to pay off the development finance
does this make sense?
development finance is a very specialist product designed to be used for paying for development work. Say you were offered a loan of £300K as development finance. one option is this could simply be paid to you in one lump sum at the start however this would mean you would pay interest on the entire amount from the beginning. because you would be spending the money gradually paying for contractors work and so on, development finance normally offers you the ability to draw down the money from the mortgage gradually, for example in £100K chunks. the advantage of doing this is that you any draw down the money as you need it during development works and this saves you paying interest on the entire lump sum and therefore overall saves you money.
once you have completed the work, you can either sell the property to another person whereby you would hopefully make a profit or you could choose to continue to live there. if you chose to live there, you would almost certainly wish to remortgage the property with a standard residential mortgage because the interest rate payable on development finances typically higher than interest payable on standard residential mortgages. providing you have done a good job with the work you have carried out, ideally, the property would be worth more than when you started and there should therefore be sufficient equity available in the property to enable you to remortgage and pay off the existing development finance loan.
I suspect the £1K/month would be the monthly repayment on the mortgage. It would likely be a capital and interest repayment on the mortgage - developement finance other than the above special features are essentially just the same as any other mortgage whereby they require a monthly repayment
Yes once it is completed, you will typically be offered either the choice of converting the development into a standard residential mortgage with a lower interest rate or being able to remortgage entirely with a new lender. The broker will be able to confirm the options available to you once the work is complete but they would usually be as above.
development finance normally offers reasonably good rates of interest when compared to standard commercial loans and therefore will typically be cheaper, sometimes considerably cheaper than otherwise obtaining commercial finance from a bank. Therefore they offer normally a reasonably cost-effective way of financing major development works and refurbishments on your property which may otherwise be prohibitively expensive through commercial finance avenues. standard residential mortgages will not allow major renovation or redevelopment works typically if the work you propose is substantial. However if it is not substantial, then a residential mortgage may allow you to carry out the work and where this is the case a residential mortgage will normally offer cheaper interest than a development loan.
I am glad the above has been of assistance. Are you happy with the information I have provided to you above or is there anything above I can clarify for you any further?
Yes. Residential mortgages will typically offer the lowest interest rates. development loans will typically be 1-3% higher than residential mortgages with commercial loans being usually several points or more higher than development loans. Therefore commercial mortgage will typically be quite considerably more expensive than development loans and far more so than residential mortgages.
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