Reasons your Property Could be Unmortgageable

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If you are selling a property then it’s important to consider whether buyers will be able to secure a mortgage for it. Not every house or flat is a shoe-in for a mortgage. Since most buyers need a mortgage to make the purchase, an unmortgageable property can be difficult to sell. It may end up having its value reduced by thousands of pounds or it may be completely impossible to sell.

Here are the top reasons why a property might be assessed as unmortgageable, and some suggestions for selling even if one of these reasons apply.

The property is uninhabitable

A property that is in such a bad condition that no-one could possible live in it will not qualify for a mortgage from any bank or building society. Property that is derelict, partly derelict, not weatherproof or not secure is deemed to be uninhabitable.

The property doesn’t have a kitchen or bathroom

Kitchens and bathrooms are considered basic essentials, so if a property lacks one or both of them, it will not qualify for a mortgage. Some lenders will also refuse to grant a mortgage on a property that has no central heating as well.

There are structural problems

This is among the most common reasons for a property being judged as unmortgageable. Damage from subsidence is the structural problem that occurs most frequently. Other structural problems that arise include wall tie failure, lack of a damp proof course, and either red ash or concrete flooring which is subject to sulphate attack.

The property has a non-standard construction

Any property that is not built from brick or stone with a slate or tile roof could be considered to have a non-standard construction. This is often the case for timber buildings, buildings with thatched roofing, or mundic, cob, asbestos, corrugated iron, concrete panel and concrete frame houses. ‘System built’ properties also fall under the non-standard construction category. System-built properties include Airey, Boot,Cornish Unit, Dorran, Dyke, Gregory, Hamish Cross, Myton, Newland, Orlit, Parkinson Frame, Reema Hollow panel, Schindler and Hawksley SGS, Stent, Stonecrete, Stour, Tarran, Underdown, Unity and Butterley, Waller, Wates, Wessex, Winget, and Woolaway. After the tragedy of the fire at Grenfell Tower, buildings with certain cladding types are now considered unmortgageable.

There is Japanese Knotweed or another invasive weed present

If there is a discovery of Japanese Knotweed or another invasive weed at a property – or even just nearby – many lenders will refuse to grant a mortgage. Japanese Knotweed grows very quickly and is notorious for causing structural damage to property.

Severe damp, dry rot or wet rot are found

These issues are all considered to be severe structural defects that can be bad enough to render a property unmortgageable.

There is a history of subsidence of flooding

In some cases, a property may be considered unmortgageable even if it has not been flooded or experienced subsidence in the past, simply because they are at risk of it. Subsidence can be a big concern in areas where coal mining once took place. It is important to check if a property is in a flood risk area or a region liable to mining subsidence.

The property is cheap/low-value

Most mortgage lenders do not offer mortgages of less than £40,000 – £50,000. If the property in question has a value lower than this, it may not be mortgageable.

There is a short lease on the leasehold property

If the property in question is a leasehold flat or house, most lenders won’t consider granting a mortgage if they consider the lease to be short. Anything under ~60 years is likely to be judged too short.

There is missing planning permission/building regulations approval

If a property, or a part of it (like an extension) has been built without obtaining the necessary planning permission, it is likely a mortgage will be refused. If the property in question has had significant building work done without the necessary building regulations approval and no certificate of compliance to prove it, lenders may well refuse to grant a mortgage. This can include work such as replacement doors and windows or the rewiring of a new boiler.

The property is commercial, or part-commercial

Any property that is above or beside a shop/office, or part of it has been used as a shop/office, then it usually will not qualify for a standard residential mortgage.

It is a high-rise flat

If the property in question is in a tower block then it may not be possible to get a mortgage. Many banks and building societies are unwilling to offer mortgages on flats that are over 5 storeys high.

There is lots of council or social housing nearby

If a property is located close to a large number of council or social housing properties, it may be the case that many banks and building societies will be hesitant to offer mortgages on it.

It has never been registered with the Land Registry

Lenders will not offer a mortgage until they have proof of who currently owns the property in question. Thus, if the property has not been registered with the Land Registry and there are no title deeds, it will not be possible to obtain a mortgage against it.

It is a ‘flying’ or ‘creeping’ freehold

This describes a situation where a property goes over or under a neighbouring property, or vice versa. One example of this would be a bedroom that is above the nextdoor neighbour’s living room in a terraced property. In these circumstances, lenders may only provide a mortgage if the flying freehold is within certain size limits; alternatively, they may refuse to lend entirely.

The property has a high ground rent

If the yearly ground rent is very low then there should be no problem. However, where properties come with a ground rent that adds up to hundreds or thousands of pounds per year, or it increases sharply every 10-20 years, the mortgageability could be impacted. Approximately 100,000 UK homes are affected by this issue.

There are certain restrictive covenants in place

Things like an agricultural occupancy clause or local occupancy clause can have an impact on mortgageability. These restrict occupancy of a property to agricultural workers or local people. The same is true of properties with an age restriction like over-55s only. It is recommended to have a solicitor check the deeds for restrictive covenants and any other issues before putting a property up for sale.

Development plans are causing issues

If a property is close to an area with plans for major development work like an airport expansion or a new road, lenders may be hesitant about lending.

Exceptions to the ‘unmortgageable’ rule

There are no set-in-stone rules that offer certainty about whether or not a property is mortgageable. It depends largely on the lending policies of the mortgage lender you choose to go with. Some banks and building societies will immediately refuse to lend on problem properties, while other lenders may consider challenging properties with a few strings attached.

Generally speaking, in cases where a lender will offer a mortgage on a problem property, they will charge a higher interest rate, offer a lower LTV or insist on a larger deposit. This can mean that many mortgage buyers will be unable to afford problem properties.

Solutions for unmortgageable properties

If a property is deemed unmortgageable, there are still options for purchasing it. You may be able to choose bridging finance to secure the property, then carry out the necessary works to make it mortgageable and obtain a mortgage. If you are buying a property you think is unmortgageable, or a lender has rejected your application because of the property’s condition, contact Think Plutus today and we’ll help you find a solution.

Our mortgage experts have experience in helping clients find finance to secure unmortgageable properties and do the work to make them mortgageable. Contact us today to speak to an adviser and arrange a free, no-obligation consultation.

For expert assistance to buy unmortgageable properties, Think Plutus.

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