Mortgage for mixed-use property

[Shunnock]

I'm trying to get a mortgage on a house and am coming up against some difficulty.

I'm looking to buy a specific property in a regional town which has been zoned as "mixed use" in the town's development plan. The definition of this is that the property must reserve a minimum of 20% of its space to commercial activities which would leave us with a comfortable 80% as our own residence. My wife is a Yoga teacher and would use the 20% as a yoga studio.. happy days.

However, although my bank have approved me in principle for a mortgage of up to €250k and seem very keen for me to get on their books, they have refused the application for this property as they "don't believe it is a suitable property for a family home".

The property is a 200 year old Georgian townhouse, has been given the all-clear by my structural engineer and has been used throughout its 200 year existence as a family residence.

I've discussed it with another few lenders who have all run scared of the word commercial. Reality is that my repayments on this property would be 50% of my current rent and would also increase our income as my wife could work from home.

So far its been really demoralising and we've spent quite a bit of money already on surveys etc. The property is a period gem, in good condition throughout and is a bargain even in today's climate. The bank have said they will give me a mortgage for a higher value for a "normal" property, but it's not what we want.

My question is.. should we give up now as there is no way we are ever going to get any lending institution to take us on as customers? or is there another way or another angle which I'm not aware of which could help?

 

[Commercial]

IMO the reason they will not lend, is if the business did not perform they would find it very difficult to appoint a receiver to a commercial property if 80% of it was your family home.
If your wife was operating out of it, she could have rights as a tenant to a long lease and this would make the property even more difficult to sell.
There are a number of areas which make this kind of property unattractive for a bank. If you let out the 20% commercial space to a third party in future years and stopped paying your mortgage, the bank would find it hard to repossess.

This would be a nightmare situation for the bank, and most banks are currently trying to work through these type of cases and it is leaving them in a serious dilemma. I am working on 2 similar cases and the bank are unsure what to do as they are limited by family home protection and the rights of the tenant in the commercial portion.

It will be difficult for you to secure a mortgage on this premises.

 

[Brendan Burgess]

Commercial's explanation seems reasonable although I must say that the fact that it's difficult to borrow for a home/work unit would be counter to social policy.

Have you tried a mortgage broker?

has been used throughout its 200 year existence as a family residence.

If it has established use as a family residence, can the Local Authority insist you change the use to 20% commercial? I didn't think that they could.

So you buy it as a family home and you have no intention of using it.
The mortgage contract would prevent you from sub-letting it without the consent of the lender so any such sub-let to a third party would not be valid.

Brendan

 

[Shunnock]

It has been used for the past c.20 years as a guest house so has been split into many en-suite bedrooms, therefore the town has zoned it as mixed use commercial in their latest development plan. Prior to that it was used as a family residence, so my comment about it being used as a family residence for 200 years is not entirely correct.

I take Commercial's point that it would be difficult to appoint a receiver to a commercial premises if it was also a "family home". However, if repossessing family homes is of great difficulty to the banks right now, surely the fact that they want me to purchase a house which is purely residential and fit for a family home as they see it, would actually entail the same level of risk, i.e. not evicting a family from their home.

I have tried some brokers who are looking into it but have heard nothing back yet so I'm presuming they have come up with nothing.

Does anyone know what the chances would be of a town council re-zoning a property back to residential from commercial? The property is in a key position in the town, has been idle for 5 years etc. I know they would be missing out on rates of c. €3k per year but they may prefer to have it occupied and renovated rather than in its current state.

 

[hellbunnie]

I am looking at buying a similar property and was told by a broker that the only way to do it would be to get a commercial mortgage at higher rates and with a 30 - 40% deposit. I take it you are trying to get a residential mortgage? If you find a lender who will accommodate you I'd be interested to know who they are...