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Getting a mortgage to buy a commercial premises for residential use

  • 06-08-2018 7:22pm
    #1
    realflash17
    Registered Users Posts: 21 ✭


    hoping somebody might have some advice or experience for this scenario.

    There is an empty property and site not too far from where I grew up that is available to buy. The problem is that the empty property was used for selling agricultural produce and is registered as a commercial property, it has never been residential.

    The existing structure has lots of potential and can easily be converted into a full residential home, I don't expect an application for change of use will be a problem, the only planning required would be to alter the structure slightly but again I would not expect a problem as the property is far away from other buildings and would ease the pressure and demand for houses in the area.

    My problem is financing the purchase.I will not get a residential mortgage on a property that is currently designated as commercial, and I don't expect the seller to allow me to change the use through planning without me being the owner . Is there a way around this? Is it possible for me to get planning for change of use to satisfy the mortgage lenders but it only to be confirmed once the sale has been finalised?

    I would have thought that this would be a common occurrence but not finding much only for these scenarios.

    Many Thanks


Comments

  • #2
    Bull McCabe.
    Registered Users Posts: 46 ✭Bull McCabe.


    realflash17 wrote: »
    hoping somebody might have some advice or experience for this scenario.

    There is an empty property and site not too far from where I grew up that is available to buy. The problem is that the empty property was used for selling agricultural produce and is registered as a commercial property, it has never been residential.

    The existing structure has lots of potential and can easily be converted into a full residential home, I don't expect an application for change of use will be a problem, the only planning required would be to alter the structure slightly but again I would not expect a problem as the property is far away from other buildings and would ease the pressure and demand for houses in the area.

    My problem is financing the purchase.I will not get a residential mortgage on a property that is currently designated as commercial, and I don't expect the seller to allow me to change the use through planning without me being the owner . Is there a way around this? Is it possible for me to get planning for change of use to satisfy the mortgage lenders but it only to be confirmed once the sale has been finalised?

    I would have thought that this would be a common occurrence but not finding much only for these scenarios.

    Many Thanks

    Hi.

    I’m just reading your post, I’m in a similar situation at the moment with an old School.
    Did you ever progress with the idea and if so how did you get on?


  • #3
    L-M
    Registered Users, Registered Users 2 Posts: 23,694 ✭✭✭✭L-M


    A friend of mine did something similar but in the end he got a personal loan for a sizeable amount over 7 years, it was his only way around it.


  • #4
    Trish56
    Registered Users, Registered Users 2 Posts: 1,256 ✭✭✭Trish56


    You should be able to get a residential mortgage for this. Firstly you need to put a deposit on the property and purchase it subject to getting planning permission for change of use to residential. You will probably need an Architect/Engineer to draw up plans and Consult your Solicitor. A chat with your local planning office might be a good idea first to discuss the possibility of planning.

    For the mortgage a qualified Architect or Engineer will need to provide detailed costings for the lender and supervise the work. If you are a first time buyer you can borrow up to 90% of the total cost of building plus renovations or 80% if you are a second time buyer. Initially you drawdown 80% or 90% to purchase the building and then drawdown stage payments as the work progresses certified by your Architect/Engineer.

    Hope the above helps.


  • #5
    Bull McCabe.
    Registered Users Posts: 46 ✭Bull McCabe.


    Trish56 wrote: »
    You should be able to get a residential mortgage for this. Firstly you need to put a deposit on the property and purchase it subject to getting planning permission for change of use to residential. You will probably need an Architect/Engineer to draw up plans and Consult your Solicitor. A chat with your local planning office might be a good idea first to discuss the possibility of planning.

    For the mortgage a qualified Architect or Engineer will need to provide detailed costings for the lender and supervise the work. If you are a first time buyer you can borrow up to 90% of the total cost of building plus renovations or 80% if you are a second time buyer. Initially you drawdown 80% or 90% to purchase the building and then drawdown stage payments as the work progresses certified by your Architect/Engineer.

    Hope the above helps.

    Thanks Trish56,

    I had an Architect/Engineer look at the property (school) and he contacted a planning officer. Both said unofficially that there wouldn’t seem to be a problem getting change of use planning permission.
    Would I be applying for the permission in my name even though the property would still be owned by someone else?
    I also met with a mortgage advisor and explained the situation. She said a bank would probably treat it the same as buying a site subject to planning. Lending me 100% of the renovation costs and 75% of the cost of buying the property.
    Does this sound right?


  • #6
    Lenar3556
    Registered Users, Registered Users 2 Posts: 1,484 ✭✭✭Lenar3556


    Bull McCabe. wrote: »
    Thanks Trish56,

    I had an Architect/Engineer look at the property (school) and he contacted a planning officer. Both said unofficially that there wouldn’t seem to be a problem getting change of use planning permission.
    Would I be applying for the permission in my name even though the property would still be owned by someone else?
    I also met with a mortgage advisor and explained the situation. She said a bank would probably treat it the same as buying a site subject to planning. Lending me 100% of the renovation costs and 75% of the cost of buying the property.
    Does this sound right?

    The difficulty I would see is the sale being subject to planning. Is the vendor likely to agree to this? Could easily take 6 months+. They might if there is limited interest otherwise and this would help establish the future potential value / use even if you ultimately didn’t proceed.


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  • #7
    Bull McCabe.
    Registered Users Posts: 46 ✭Bull McCabe.


    Lenar3556 wrote: »
    The difficulty I would see is the sale being subject to planning. Is the vendor likely to agree to this? Could easily take 6 months+. They might if there is limited interest otherwise and this would help establish the future potential value / use even if you ultimately didn’t proceed.

    I’m currently waiting to hear back from the vendor on how she wishes to proceed.
    She’s aware of the delay this process would have on the sale. I’m thinking she was hoping for a straightforward sale, to sell it as it is (commercial) but due to its rural setting I wouldn’t think it would draw much interest to a potential business.


  • #8
    Bull McCabe.
    Registered Users Posts: 46 ✭Bull McCabe.


    Lenar3556 wrote: »
    The difficulty I would see is the sale being subject to planning. Is the vendor likely to agree to this? Could easily take 6 months+. They might if there is limited interest otherwise and this would help establish the future potential value / use even if you ultimately didn’t proceed.

    I’m currently waiting to hear back from the vendor on how she wishes to proceed.
    She’s aware of the delay this process would have on the sale. I’m thinking she was hoping for a straightforward sale, to sell it as it is (commercial) but due to its rural setting I wouldn’t think it would draw much interest to a potential business.


  • #9
    Trish56
    Registered Users, Registered Users 2 Posts: 1,256 ✭✭✭Trish56


    It's normal procedure to buy subject to planning just like when someone buys a site to build on is always subject to planning permission. Once you submit your application it should take 3 months unless further information is required.

    Yes you apply for the planning permission in your name and in the mean time you pay a refundable deposit to hold the property in your name.


  • #10
    Bull McCabe.
    Registered Users Posts: 46 ✭Bull McCabe.


    Can I also ask, if I were to get an architect to draw up some plans and apply for the Planning, will a bank allow these costs to be taken out of my deposit money and still be used as part of the deposit with invoices provided as it is all relevant to the buying process. Or will this have to be paid for separate to my deposit savings?


  • #11
    Trish56
    Registered Users, Registered Users 2 Posts: 1,256 ✭✭✭Trish56


    All lenders have different policy and criteria so really depends who you are going to apply to. I know Haven Mortgages which are part of AIB allow for professional fees to be included in the costings. You need to keep a record as in pay by bank transfer and get a receipt. You should really also discuss with your Solicitor.


    Bull McCabe. wrote: »
    Can I also ask, if I were to get an architect to draw up some plans and apply for the Planning, will a bank allow these costs to be taken out of my deposit money and still be used as part of the deposit with invoices provided as it is all relevant to the buying process. Or will this have to be paid for separate to my deposit savings?


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  • #12
    Bull McCabe.
    Registered Users Posts: 46 ✭Bull McCabe.


    Trish56 wrote: »
    All lenders have different policy and criteria so really depends who you are going to apply to. I know Haven Mortgages which are part of AIB allow for professional fees to be included in the costings. You need to keep a record as in pay by bank transfer and get a receipt. You should really also discuss with your Solicitor.

    Thank you for all your information.
    It really is invaluable to someone clueless like myself.


  • #13
    Walton2007
    Registered Users Posts: 1 ✭Walton2007


    Any updates @Bull McCabe. or @realflash17 ? We have found ourselves in a similar situation where the bank doesn’t want to give us a residential mortgage on a commercial property when our intention is to convert it to residential. Thank you!



  • #14
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,364 Mod ✭✭✭✭Jim2007


    https://www.boards.ie/discussion/comment/120894392#Comment_120894392

    FYI, neither user has been around in several months now.



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