Mortgage for home with home office?

summereire

Hi, I'm wondering how the bank treat mortgage applications for building a family home where part of it will be used as a home office? Does it qualify as a regular home mortgage and follow the normal application process? Thanks

4ensic15

summereire wrote: »

Hi, I'm wondering how the bank treat mortgage applications for building a family home where part of it will be used as a home office? Does it qualify as a regular home mortgage and follow the normal application process? Thanks

It depends on what the office use is.
If you put a briefcase on the diningroom table it is not a change of use in the planning code. If you remodel the house internally and have an office with separate entrance, employees and customers calling then you may well be making part of the premises commercial and it would not be something a bank would give a home loan for.

summereire

Thanks. So in the second case, would there need to be a dual mortgage where there are separate residential and commercial loans covering the construction of the building and how would that work from a security point of view given that there would be one deed?

4ensic15

Most likely the banks would view it as a commercial premises with living accommodation. The entire would be treated as a commercial loan. It is not something the banks would be rushing to finance and even then it would be on commercial terms.

F412

Why are you even considering telling them? Say nothing!!

4ensic15

F412 wrote: »

Why are you even considering telling them? Say nothing!!

It seems to be a new build so it will be clear from the plans!

F412

4ensic15 wrote: »

It seems to be a new build so it will be clear from the plans!

Just call the room something else (games room, storage room etc) when talking to the bank.

4ensic15

F412 wrote: »

Just call the room something else (games room, storage room etc) when talking to the bank.

The planning application is going to have to show what it is, if it is going to have it's own entrance etc. If it doesn't the o/p could be hit with a cease and desist order for breaching the planning use of his house. The bank will want copies of the plans lodged and will want certification by an engineer that the building is being built according to the plans.
The planners have no problem with someone using a room in a dwelling house as an office if it is just to store files, work on a computer or the like. It is different if there are customers calling and staff employed by the business.

Eric Cartman

If you have a registered company and are doing this there may be positives or negatives out of this

1) negatives
possible rates payable implications
banks not giving a personal mortgage

2) positives.
you could potentially pay for half the build before tax saving you a boatload or pay for the whole thing before tax and then sell half the building to yourself and paid back using a preferential loan (all of this stuff you would need to talk to your accountant about , I am not a financial advisor and this is just broad strokes sketch stuff I'm talking.

commercial finance / business loan against an asset may have a pretty decent rate and may compete with a mortgage.

if you have a limited company and it goes wallop you would lose the house but would not be liable for any further payments to a mortgage or face personal judgements. (yet again, talk to your accountant about all this. )

summereire

Thanks, some great points there. It does get quite complicated when there are multiple uses, and there are many legitimate ways of framing it, hence the confusion! One of the main things I've noticed about commercial mortgages is that the terms tend to be much shorter which minimises the amount that can be borrowed.

summereire

Eric Cartman wrote: »

you could potentially pay for half the build before tax saving you a boatload or pay for the whole thing before tax and then sell half the building to yourself and paid back using a preferential loan (all of this stuff you would need to talk to your accountant about , I am not a financial advisor and this is just broad strokes sketch stuff I'm talking.

The saving you're talking about there, how is that achieved? Is it considered capital expenditure to be written down some percent each year? Or can the whole amount be considered a business expense? I'll obviously get the accountant involved but just trying to get a broad sense of it.

Eric Cartman

summereire wrote: »

The saving you're talking about there, how is that achieved? Is it considered capital expenditure to be written down some percent each year? Or can the whole amount be considered a business expense? I'll obviously get the accountant involved but just trying to get a broad sense of it.

your really going to have to go to an accountant with it but I think the broad strokes says borrow the cost of it and you pretty much write off your repayments every year. Also VAT gets taken away.

newacc2015

Banks used to anyway charge a premium for giving commercial loans for properties. Ask your accountant about it. As someone said you might claim back part of the VAT, cost of building

My personal issue would be the likes of rates on the commercial part. There is also the cost of 2 water meters, 2 ESB connections, levies to the council. Would you consider just building the house, as a house then sitting in a granny flat style office where garage would go?

Have you spoken to the architect about ways to structure the planning application? Some can literally only draw plans to codes. Where as others are extremely creative and will get you a 2000 sq foot double fronted house, when you should only get a modest 1200 sq foot home. The architect my father used to use,as well known as the guy to go to get something weird on the Dublin mountains eg flood lighting for your tennis court