When a property is ‘unmortgageable’
You’ve found the perfect property to buy but your pockets aren’t deep enough. So off you go to the bank to try and arrange a mortgage. The surveyor visits the property, makes their notes and says the bank will be in touch with their decision in a few days.
The bank finally comes back to you and unfortunately ‘It’s a no.’
‘But why not? I’m a person worth lending to! I have a stable income and a good deposit.’ you say.
‘Well unfortunately it’s not you that’s the problem; it’s the property.’ the bank replies.
This is a situation that no one wants to be in. Unfortunately there are occasions where a property would be ‘unmortgageable’. Below are a few common situations where you would find it difficult to secure a mortgage.
No kitchen or bathroom
If the property you have your eye on doesn’t have a kitchen or a bathroom then I’m afraid it doesn’t pass the ‘Is it habitable?’ test. So even the most expensive beach hut in a prime location would be unmortgageable.
Solution? Investigate getting a kitchen/bathroom put in. You might question why there wasn't one there in the first place, but do your homework in advance of buying.
A short lease remaining on the property is something that a mortgage lender will be wary of. And by short, we mean anything under 70 years. Which may not seem that short as will you even be alive at the end of the lease? As the lease length shortens, the value of the property decreases. This increases the loan to value ratio, making the secured asset less reliable in the event that you fail to pay your mortgage. This is a risk that not all mortgage lenders are willing to take.
Solution? Speak with the freeholder about extending the lease
Value below £50k
Those who live in London/South East, get ready to have your minds blown. There are properties out there that you can buy for less than £50k. For the same price you’d be looking at a mere parking space in central London. Unfortunately properties under £50k are not profitable enough for a lender to consider. The amount of admin work that a lender will have to do for a £50k or a £500k property is no different. So of course they don’t want to be doing the same amount of work for less profit.
Solution? Add value to the property by doing some renovation. You could also speak to alternative non high street lenders or a bridging loan provider instead.
We’re not just talking about an overgrown garden here. The main plant that lenders will have a problem with is Japanese knotweed (although others such as Himalayan knotweed, Himalayan Balsam or giant hogweed may also be a red flag). Japanese knotweed is an ambitious plant to say the least. It can grow up to 10cm per day and will find its way into even the smallest of cracks. This leads to structural problems with the property.
Solution? Getting rid of this invasive plant is tough. Some experts have said it can't actually be eradicated. You'll need to get the professionals in.
Non standard construct
Being different isn’t always a good thing when it comes to getting a mortgage. If the property isn't built with what many consider ‘standard’ material, mortgage lenders will be wary of it. As it might be harder to get the property insured. By standard we mean brick or stone walls, with the roof made of slate or tile. So that cute thatched roof cottage might not make the cut.
Solution? You’re probably going to have to be a cash buyer or work with an alternative lender to secure a mortgage.
Most of these you can solve with a little time and effort. Sure you might need to take a bridging loan out until you fix the issue. What’s a little work when it’s your ideal property?