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  • 16/12/2002
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My client has started to work full-time on a freelance basis from home. Can he change his mortgage from a residential one to a commercial one and would it be a beneficial move?

‘Working from home’ covers a range of property types and the type of property the borrower occupies affects the mortgage that could be considered.

If the client uses a spare room in a standard residence for light office duties, it would be financially beneficial to remain with his residential lender. The rates offered by high street lenders can be lower than standard market rates for fixed periods and consequently competitive compared with the commercial lenders. Other alternatives such as building an office within his grounds could require a change in planning consent.

However, the applicant must ensure the terms of his mortgage are not being breached.

Provided the title to the property can be split and the office is isolated from the residence, the expertise of a commercial lender may be more appropriate. This arrangement may allow the applicant to separate the commercial element with the borrowing arranged through a limited company. It may be possible to borrow the required funds on a limited liability basis.

The commercial lender is better able to work with architects and surveyors to smooth the pay-ments, particularly when the building works varies from the plan. This approach relies on the borrower raising cash for his equity investment. The options need careful consideration.

Commercial lenders may restrict any advance to 75% LTV, which may prove more restrictive than their residential counterparts. The applicant must ensure he does not breach the terms of his mortgage.

Andrew Turzynski


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