Theoretically, spray foam insulation sounds like a great way to protect your home from cold and drafts, as a higher-end insulation option that’s been on the market for about 30 years.
However, it can be a serious issue if you need to finance a property, whether that’s remortgaging, applying for an equity release product, or buying a new home. Often sold as a higher-performing insulator than mineral wool, spray foam is present in thousands of homes, in wall cavities, flooring and lofts.
The problem is that some mortgage and most equity release lenders won’t touch properties with spray foam insulation for various reasons.
Here, Think Plutus explains why mortgage lenders are reluctant to lend against any property with spray foam insulation, how the different types of insulation impact your mortgage prospects and some potential solutions.
The Challenge of Mortgaging a Property With Spray Foam Insulation
Arranging a property survey can be nerve-wracking, always with the potential (however slim!) that the valuation won’t meet your expectations or will find something untoward.
Spray foam insulation is one of those many factors that can throw up a red flag to a mortgage lender. For a lender, your insulation matters because it affects crucial metrics such as the home’s saleable value and energy efficiency rating.
There are several concerns here:
- Spray foam (or SPF) is a liquid that expands and solidifies. So far, so good, but that means, if the roof space is sealed, air circulation is massively restricted.
- Lack of airflow causes condensation, which can cause roof supports to weaken or even rot over time.
- Depending on which type of spray foam insulation you have – more on that shortly – a hard-set insulation material can strain the roof timbers, causing distortion and instability.
It becomes a significant dilemma when you factor in potential long-term detriments to the building’s structure and concerns that SPF may have health consequences for people with conditions affecting their breathing.
Mortgage Lender Attitudes to Different Spray Foam Insulation
The first step is to identify which type of spray foam insulation you’re dealing with.
- Open-cell spray foam insulation is spongier, more flexible, and softer, so it is usually a lot easier to remove and replace.
- Closed-cell spray foam sets rigid, preventing air or moisture movement. It is more stable but probably more expensive to remove than the original insulation.
If you are set on remortgaging, removing spray foam insulation is a possibility. Still, it’s important to note that some lenders might still have reservations, depending on how long it’s been in situ.
Removal isn’t a straightforward job because the spray application gets into every nook and cranny.
If the insulation has been in place for several years, a mortgage lender might decide that there’s still too substantial a risk that damage has already been done. It’s essential to seek professional advice or commission a surveyor before taking drastic action.
There are a few caveats here, in that a very limited number of equity release and lifetime mortgage lenders will consider properties with more pliable open-cell spray foam.
Conditions include a requirement for the open-cell spray foam insulation to have been fitted during construction, as long as it is the Icynene product, with a guarantee and BBA approval.
Before applying for an lifetime mortgage, or any mortgage, it is therefore well worth investigating exactly what spray foam you have in your home and checking back on the contractor’s paperwork and warranty documents.
How to Mortgage a Property With Spray Foam Insulation
Now we understand the problem, let’s talk about solutions.
Surprisingly, contractors still recommend spray foam insulation, so it’s not a hugely uncommon issue, but one that needs a careful approach.
We’re not in the habit of offering generic advice, since it’s undoubtedly not applicable to every scenario, but as an indication of potential strategies:
- If you have open-cell SPF, the best recourse is to consult an experienced broker. Some lenders will contemplate mortgage lending or offering an equity release on this type of property, but the choices are extremely limited, so they need to be approached with skilful guidance.
- Closed-cell SPF can be removed – but note that this will typically cost a fair bit more than the original insulation and may not completely mitigate the financing issue.
- Replacing the whole roof will solve the predicament, again, not a low-cost solution. However, a roof doesn’t last forever, and if it’s coming to the end of its life cycle, replacing the spray foam at the same time is a good bet.
If you are looking to buy a property with spray foam, there could also be less conventional alternatives. For example, if a mortgage lender won’t consider securing a mortgage against the property, even with a mortgage retention, a bridging finance lender might.
Bridging loans are more expensive in terms of interest rates, but they’re also a lot more flexible. For example, developers often use bridging loans to cover the cost of purchasing and renovating uninhabitable properties that aren’t eligible for a standard mortgage product.
The drawback here is that you’d need to demonstrate how you plan to repay the loan – through a remortgage once the spray foam has been removed – so you would ideally need an agreement in principle to support your application.
Equity Release, Mortgages and Spray Foam Insulation – the Takeaways
Lenders rarely publish any definitive guidance on their policy towards spray foam insulation, so it is all but impossible to know whether they are likely to approve a mortgage or equity release without tailored advice from a whole-of-market broker.
Mortgage lenders generally rely on the surveyor to identify the insulation present and either use that valuation to make a judgment call, some lenders and most Equity Release providers refuse to lend against properties with spray foam insulation as a blanket rule.
The Residential Property Surveyors Associated (RPSA) is also forming a stakeholder group to try and solidify the sector approach to the challenge of spray foam – we are expecting guidance to be published in the next year or so.
In the meantime, while we would strongly advise against ever fitting spray foam insulation in your home, there are usually suitable mortgage options available to meet your requirements, although Equity Release can be more of a problem, especially with the closed-type spray foam.
Please get in touch if you would like further information about mortgages or equity release lending against a property with spray foam insulation.
Think Plutus provides wholly personalised whole of market mortgage advice, recommending products and lenders that we believe offer the most competitive solution in line with your personal needs and circumstances.