We hear a surprising number of questions about buying the property next to your current house to turn it into a rental. Renting the home next to our existing house has some distinct advantages. You’ll always be close by to keep an eye on the property and you’re much more likely to be able to secure your rental payments if you live next door. Or you might want to rent to your family.
Despite the simplicity for the landlord, underwriters are often nervous about this type of property purchase. If you own two adjoining properties and have an individual mortgage on each home, this is considered a higher risk to the lender.
If you were to knock through the walls and turn two properties into one, the lender would be none the wiser. And if you were then to default on one of the two lending products, the lender would have a much tougher time trying to repossess the property.
It might take a bit of a wild leap to reach this point, but underwriters are paid to identify risk, and this is one type of risk that they can easily avoid. While it might be convenient to own two adjoining properties, lenders certainly don’t see it this way.
Lenders such as Santander and Metro do not lend on next-door properties due to the risk of the homeowner knocking through and turning two properties into one. Their stance will soften if there is a divide between the properties. So you could purchase a detached or semi-detached property, provided they are not linked. Yorkshire Building Society takes a similar approach to lending.
Post Office and Natwest are slightly more flexible in their approach, passing the responsibility to the surveyors to determine if there is a risk the properties could easily be adjoined. This can be more stressful, as it could be further through the application process when the surveyor decides not to lend.
To further complicate matters, lenders will also have their own limits on how many properties in an area can be mortgaged to them. They might set a limit at 10% per street, so if there are only 10 properties on the street and you already have a mortgage with one lender, they might be unwilling to take on another property in the same area.
To find out your next steps if you would like to purchase the property next door as a buy to let, get in touch with Niche Mortgage Info today. We can advise on the best course of action and the lenders most likely to consider your application.
