Mortgage for house on land- how do we split the land?

summereire

Hi, we have some land that is used for farming and commercial purposes and want to apply for a mortgage to build a house on part of it.

I'm guessing that it will be best to allocate part of the land as the residential part so that it can be considered separately from the working parts.

My question is, from the point of view of securing the mortgage, how would the bank want this done? Is it enough to just show them the planning map that shows the area where the house is to be built or would they require that we formally contact the land registry and create a separate folio for the house from the rest of the land?

Thanks in advance for any suggestions on this.

sky6

You will end up running backwards and forwards for a few weeks as no one will give a definitive answer initially. But you should be able to get advice and indications from the various sources with each contact. Best to have the few things below to help with talking to the bank.
You will need a Solicitor on board at some point so it will help to have him on board early. If he's dealt with the bank before it might be a bonus.
I would imagine you would need to satisfy the bank as to the ownership of the land first.
If it your parent's land then a letter from them stating their willing to sell or hand over ownership of the site of land subject to receiving planning and a Mortgage.
Then a map showing the land with the proposed site also marked out on it. Maybe a visit to the Council to check out if they would have any definite objections also.
You will need to employ an Engineer to measure out and Map the site for the land Registry to create a land folio.
A word of caution make sure the Bank are only given the new site as collateral for the loan as in my experience they'll try and take the whole farm if allowed.

Best of luck with it.

summereire

Thank you, that's great! Do you know is it just a matter of splitting the current folio into two, or will the bank also require rights of way etc over the remaining folio into the newly created one that they have security over?

I'm puzzled by this because if they don't, is it not an issue if they then later need to repossess, and if they do, isn't there a land registry rule that you can't have a right of way over your own property to yourself? Ultimately we just want to keep the bank happy and do as little as possible otherwise.

sky6

I was assuming the new site would have Road Frontage or access. If it doesn't then I would be surprised if the Bank provided lending. At the very least a right of way over a shared driveway.
Basically the Bank will view it as being a saleable asset in case you were to default on the loan. If that is not the case then they may well decline unless you can provide even more security.
As to the Split of the folio. The Land registry will take the present Folio and redraw it into two based on the details supplied by the engineer and Solicitor. The request will have to come from the current Landowner or his Solicitor.
It's not something burdensome it just takes a while , I think the last one I was involved in took about 5/6 Months but eventually it's all done.

kildarejohn

sky6 wrote: »

I was assuming the new site would have Road Frontage or access. .

The Council planners can also have a very negative view toward what they call "backland" sites - they prefer sites to have own road frontage. In some cases backland sites are only allowed if other family members confirm they have no objection.

rovertom

If your planning site boundary included the access to the public road, this will have to be included within the house folio.
If the planning site boundary did not include the access, you can leave it out of the house folio but you would have to sign up a right of way to access the house or at least agree to provide a right of way should the house be sold / repossessed.
The solicitor will sort the legalities of the right of way.

summereire

Thanks very much for the replies, really helpful as I've never even considered this before. Just to clarify; no probs at all with the planning- we've had that approved in the past but it expired and are told it will be fine to get it again this time.

Its just purely a question of the bank and the mortgage and what they'll accept. Obviously we could give them the whole folio but as said above we don't really want them to have control over the whole thing in case we need to borrow commercially at a later point nor is there any reason for them to have an interest in it.

The whole property is off of a main road but its on a private roadway which is a lot like a public road if that makes sense. Full rights of way etc in place so no problems there. If we subdivide the folio the new folio will be located via this private road and partially over a new bit of private road that will remain in the old folio.

I suppose what I'm wondering is whether we need to grant a right of way to ourselves over our own land in the new folio or if its enough to tell the bank if they ask that we will of course provide it should they ever ask for it. The council, us, solicitors, engineers etc don't care either way but we just want to pre-empt their response.

rovertom

summereire wrote: »

Thanks very much for the replies, really helpful as I've never even considered this before. Just to clarify; no probs at all with the planning- we've had that approved in the past but it expired and are told it will be fine to get it again this time.

Its just purely a question of the bank and the mortgage and what they'll accept. Obviously we could give them the whole folio but as said above we don't really want them to have control over the whole thing in case we need to borrow commercially at a later point nor is there any reason for them to have an interest in it.

The whole property is off of a main road but its on a private roadway which is a lot like a public road if that makes sense. Full rights of way etc in place so no problems there. If we subdivide the folio the new folio will be located via this private road and partially over a new bit of private road that will remain in the old folio.

I suppose what I'm wondering is whether we need to grant a right of way to ourselves over our own land in the new folio or if its enough to tell the bank if they ask that we will of course provide it should they ever ask for it. The council, us, solicitors, engineers etc don't care either way but we just want to pre-empt their response.

If your planning has run out, this would be first thing to do as a bigger site could be required this time around or planners might want a different entrance etc so no point creating a new folio till you are sure what the site boundary is.
Once you have that planning boundary confirmed, just leave it to solicitor and engineer once you instruct them that only the lands as per the planning are to go into that folio.