Rearranging The Portfolio

THE QUESTION

We have a property which the whole ground floor is our residential home, and above we have 3 two-bedroom flats, which we let out. The current mortgage ends in later this year approx. 30%LTV.

Our ages are slightly problematic as my husband is 76 and I am 63.  Our current broker is suggesting gearing up our other properties and paying off this one, they say this is the cheapest way to do it, plus a lump of cash from us. 

We are a bit reluctant to do this, as the other properties are our piggy bank for later, however he says no lender will like our configuration. Doing it this way we limit our cash reserves and end up leaving the kids a pile which we are somewhat reluctant to do!

Any suggestions?

THE ANSWER

The problem you have is that you fall between two stools. Main residence lenders don't like multiple self-contained units on a single title, they like even less that you rent them out. BTL lenders don't permit you to live in the property, or part thereof. So both avenues are closed off to you; your broker is correct.

Your arrangement with your current lender worked because they are essentially a commercial lender; it’s a shame you have exceeded their age limit.

Have you thought of splitting the title? That will make your ground floor home eligible for a main res mortgage, should you choose to get one.

The 3 flats still won’t fit on a standard BTL mortgage because they don't lend on multiple self-contained units on a single title, but it will fit on an Multi Unit Freehold Block (MUFB) mortgage.

You have a low loan to value so, given that any main res mortgage is income dependent and to a large degree also age dependant, you might find it easier to transfer all borrowing onto the flats and leave your home unencumbered. 

That should tick all boxes

•  You can pay off your current lender at the end of the term
•  You have no mortgage remaining on your home, so your age is irrelevant
•  The 3 flats are on a mortgage where age and income are far less relevant
•  The rest of your rental portfolio remains undisturbed

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