Lenders attitudes to Live/Work

 

Most high street mortgage lenders will lend to live/work buyers. But as a general rule, many prefer properties with workspace at a third or less of the unit's total floorspace.

There are exceptions though and in this young market it may well pay to get a broker to find you the right deal. Some lenders - such as GMAC - will only lend via brokers. Others will make special deals with brokers, particularly on new live/work developments.

We approached both high street and specialist mortgage lenders for their detailed take on live/work mortgages. Responses we have received so far (we will update this list as more come in) include:

HALIFAX/BANK OF SCOTLAND (HBOS)

(also subsidiary The Mortgage Service)

Happy to lend on live/work and cite ample demand from architects, solicitors, designers etc. Prefer schemes where clients do not visit the property, or no more than 10 visits made to the site each week, and ideally no more than one employee

Ratio: no more than 30% workspace

General conditions: Background check on source of income, public liability insurance to limit risk, would not want to lend on more than 25% of units in any one scheme

Rates: Same as for residential

Track record: Good, but patchier in some areas where live/work is less well established

COMMERCIAL first

Very happy to lend on live/work but at commercial rates.

Bespoke product: in September 2006 launched new range of products including 'Trading from Home' mortgage, aimed at borrowers who work or trade from their residential property. Also available for people looking to buy or remortgage a work/live-in unit. 'We would class live/work alongside our trading from home schemes.'

Ratios: up to 40% for work use. 'Generally we would be very comfortable at 50:50 split, although the financial information and credit profile of the customer would have to be considered.' 

Rates: Potentially 85%  LTV (loan to value) to £500k, 80% up to £1m, 75% up to £1.5m and 70% up to £2m. 'We can offer an interest-only period for the first three years and overall mortgage terms up to 30 years.' Can fix repayments for three years, with margins from 2.25% through to 3.25% above LIBOR (currently 4.7%), depending on loan to value. Within these products, the client is able to self-certify their income, together with an accountant's letter.

General conditions: Check on client's credit profile, including previous mortgage conduct, security considerations, ie condition, alternative use, marketability, planning consents, etc.

client must commit to a minimum of three years with Commercial First

Contact details: intermediary-only lender so go through a financial adviser or mortgage broker

SAFFRON BUILDING SOCIETY

(formerly Saffron Walden, Herts and Essex BS)

Will lend. Comments: 'We recognise there is increasing demand for live/work units, particularly in the inner city where accommodation is severely limited and planners are looking at the environmental and lifestyle issues. At the moment [we do] not have a bespoke live/work mortgage product but this is certainly an area of the market we are keen to consider further.'

Brokers John Charcol note: 'very good and responds quickly'.

ABBEY

Will lend. 'We offer new build mortgages but not special new build live/work mortgages. We are reasonably flexible, but because it's not a standard mortgage, we will treat each case on its own merit.'

General conditions: No visiting clients. 'Hard to say if we'd definitely turn down an application, but potentially any commercial enterprise which might be deemed antisocial because of noise or odours. The thing uppermost in our minds is marketability.'

Rates: Same as residential mortgage but maximum loan to value of 90% if borrowing up to £100,000 and 85% if borrowing up to top loan of £250,000. Additional management fee of £150-300.

Live/work ratio: 'It would be a matter for our underwriters.'

NATIONWIDE

Will lend. 'We don't receive many applications though they are becoming more popular and will continue to offer them.'

General conditions: No more than 45% business use, prefer low risk enterprises like the arts or computer-based work. All offers subject to an independent valuation and risk review. Decision may depend on the character of the area and council planning requirements.

Ratio: Maximum 45% business use. Work space should permit a broad range of activities and living and work space should be sufficient large to appeal to potential buyers in any on-sale.

Rates: same as residential mortgage

ECOLOGY BUILDING SOCIETY

Will lend. 'Our mortgages have always been available for live/work properties nationwide.' And there's no problem with local branch officers not understanding live/work: 'We only have one branch/office.'

General conditions: property should be built sustainably and/or be very energy efficient.

'We specialise in lending on properties that have a low impact on the environment, so the more energy-efficient the property is, or is being made, the better. If the property is being renovated or involves energy-efficient improvements it will be assessed on this basis, providing the proposed business is not detrimental to the environment.

'There may be other scenarios where the property does not require improvements but the business has an ecological bias which warrants our full support. There may also be circumstances where the inherent environmental benefits of live/work space are sufficient.'

Rates: as any residential mortgage

MONEY PARTNERS

Will lend. We are specialist so can consider each case on merit and consider ourselves to be more flexible with less mainstream properties.

Ratio: less than 25% work

General conditions: Work aspect must not adversely affect the property's current or resale value - if it was significantly given over to work, that would exclude it from consideration. No employees on site, work separate from the residential area. All local authority licences and permissions must be in place and must have the right insurance and health and safety certificates.

Contact details: use an intermediary broker

HSBC

No official response forthcoming however anecdotal evidence from brokers and borrowers suggests decision is down to individual branch managers. Live/worker Jeff Lowe comments: 'Lewisham Council has had lots of enquiries about live/work mortgages and I've always put them onto HSBC in Lewisham - they've always been very good.'

CHELTENHAM & GLOUCESTER

Will lend? Doesn't do much and doesn't have a formal policy. Has referred cases to an underwriter but adds 'anything other than a single room or study would have to be dealt with on a case by case basis.

PRINCIPALITY BUILDING SOCIETY

Very low level of lending activity and this is dealt with by its commercial lending arm.

SKIPTON BUILDING SOCIETY

Will lend but only as a commercial loan.

NORWICH AND PETERBOROUGH BUILDING SOCIETY

Will lend? Has lent through brokers and in July 2006 told liveworkhomes: 'We will consider live/work loans on a residential basis and this service is available in England and Wales.'

But in October 2006 said: 'The only live/work we get involved in at the moment would probably be flats above shops'.

General conditions: Must be primarily residential, at least 40% of the total land must be for residential use, loan to value restrictions may apply. Must not be mortgaged to any other lender. Valuer must confirm the property is suitably secure. Customer must satisfy the society's status requirements.  Applications assessed on a case by case basis.

Other comments: 'Most live/work units are subject to a planning restrictions that stipulates the unit must be owner-occupied. If there isn't a planning restriction on the property, and it is the applicant's intention to let the property, we can help.'

BRISTOL & WEST BS/BANK OF IRELAND

Bank of Ireland has lent through John Charcol but official line is: 'Under our credit policy, "mixed use" properties are not acceptable though it is understood these are different to, say, a unit which comprises a flat above a shop.

'The credit position remains that, as there are local authority restrictions around the use of the property this reduces the potential sale market should we ever take [it] into possession.'

Bristol & West notes that a decision not to lend on live/work was 'made some years back', but why is unclear. B&W's senior product manager adds: 'My guess is there will be an increasing requirement for this but am less clear how long this will take and how big the market will be.'

STANDARD LIFE

Has published its own research predicting a surge in home-working. But will this translate into live/work loans? Response expected shortly.

Not currently lending on live/work

• CO-OPERATIVE FINANCIAL SERVICES
• COVENTRY BUILDING SOCIETY
• KENT RELIANCE

ARE YOU INVESTING IN LIVE/WORK?

Is your organisation involved in funding live/work mortgages, either providing mortgage finance or brokering loans? If so, we'd love to hear from you. Email us