Friday 18 November 2016

Finance Fridays – Unmortgageable properties

We were gripped by the freezing temperatures for last week's Finance Fridays post on Cold Weather Payments. This week we are talking about what happens when you find you have an unmortgageable property. The housing market is currently at crisis point so people are looking at all sorts of different properties to buy.

What makes a property unmortgageable?

Most high street lenders have the pick of the properties when it comes to getting customers so they can afford to be picky or risk-adverse. If a customer does default on their mortgage they have to assess whether they would be able to get the full loan amount back if they had to sell it on the open market or at auction. These are the main reasons why mortgage companies turn down loans on properties:

- Derelict property
- No kitchen or bathroom
- Low value property
- Structural defects, damp, wet or dry rot
- Near mining works, landfill, recent flooding or subsidence
- Leasehold properties with short leases left
- Boundary disputes or where planning applications haven't been applied for correctly
- Unusual or non standard construction such as concrete, wood, steel-framed and thatched roof properties
- Flats in tower blocks over 5 storeys high
- Ex-local authority flats in tower blocks
- Properties above shops or commercial facilities
- Japanese knotweed

How can the property become mortgageable?

If you pay can cash then do but you will need further finances in place to do the work needed on the property. If a mortgage has been refused on the grounds of the property having no kitchen or bathroom then put one in. If it is low value then work on it will bring it up in value. If it has a short lease see if you can buy it or at least extend it past 100 years. Rather than approaching a mainstream lender you may be better going to a specialist mortgage provider. You will probably end up paying a higher interest rate.

Problems beyond your control

Before you commit to buying any property get together as much local knowledge as possible. Is the property on flat ground near a river? Are there any new roads or train routes proposed to be built nearby? Once you have done that you need to get a full survey done on the property. Make sure the surveyor goes inside the property to check it out fully. If you find there are too many problems it might be worth you walking away from it. Even if you don't need a mortgage now think about problems you may have if you need to sell it in the future.

Have you ever had difficulty getting a mortgage on a property? Do you have a mortgage with a specialist lender?

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Finance Fridays

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  1. I haven't had this experience but is good to be aware of it. There is so much unknown when buying a house you need to take all precautions. x

  2. I used to work for a mortgage lender and often came up against customers who seemed to think it was ok to lend on a property without a kitchen or whatever. That said though there are sometimes exceptions to these rules e.g. my employer would lend on Barbican flats even though they breached some of the rules.

  3. We are about to put our house on the market, had no idea about all of this. Hoping to have an easy time of it all ;)

  4. We've had problems getting a mortgage because of self employment but thankfully we have a very good mortgage broker!

  5. Thankfully I don't think that there are many of these properties available these days but they are bargains if you have the cash to buy them


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