Finding it hard to find a lender for your property?
Poor valuer’s comments – who will give you a mortgage?
Boundary disputes / Flying Freeholds finance
New build / Ex local authority / Concrete construction mortgages
By resident mortgage expert Mr Payam Azadi
Beauty is in the eye of the beholder! The property that might not appeal to one man could be another’s castle. Please excuse the clichés – but I believe it emphasises the point. You have your possessions packed and ready to embark on a new life in a perfectly acceptable dwelling and some surveyor (who undoubtedly lives in at least a 3 bed semi) sticks his claws into your mortgage application and tells the lender that the property is unsuitable or unfit for mortgage purposes. And, this is the same guy you have just shelled out two hundred and fifty notes to! Cheers!
Lesson 1: what lies beneath!
Well back to the drawing board then! But herein lies lesson one. You might think switching mortgage lenders will provide a more favourable outcome – and you could be right – but you could also equally be wrong.
How so? Well mortgage lenders can and do outsource their work to surveyors. Lender’s tend to outsource, as most private institutions do, on the basis of the cheapest (not necessarily the best) and national coverage. Unsurprisingly winning a tender with a large lender attracts interest from other lenders (its all very incestuous). Therefore you could apply to Lender A, B and C and encounter the same bod and the same derogatory comments that set you back in the first place.
How do you avoid this outcome. Well either you phone around or you employ the services of a Mortgage Broker to do so on your behalf.
Lesson 2: just because you like the property does not mean the lender will!
Lenders like conventional properties, typically 2, 3, 4 or 5 bed houses built in the 1930s of brick and tile and situated in towns. Great I hear you shout – because properties come in all shapes, sizes and constructions – just ask the three little pigs! Seriously this is a real conundrum.
Anything outside this mould could trigger the requirement of greater deposit or a complete rethink.
Lesson 3: not everyone uses a residential mortgage to buy property
Having had a bad mortgage application experience you may have taken to the streets to collect your thoughts for next move. Chances are you strolled down the high street and seen many a property that appears on the face of it to be un-mortgagable. The flat above a nightclub for one! Well it could be that it is rolled into a commercial mortgage along with the dance floor or a cash buyer has snatched it up. Most Commercial Mortgage Brokers, like Niche Advice, could help you with the former but that’s not really where this article is driving at as the rates could be unnecessarily high. Perversely, often flats above shops are some of the most marketable in the buy-to-let arena. Being on the door step to a busy shopping centre can save a tenant communing costs, and the stagger home, but to keep this in the appropriate context residential mortgage lenders do not underwrite the financial benefits of a property they want to know they can sell it quickly in the event of mortgage default and regain enough money to clear the debt.
Lesson 4: brand new is not always wonderful for mortgage purposes
You might think you cannot surpass a brand spanking new build for suitable collateral for a mortgage loan.
Wrong! Lenders are very cautious on this front. There are a number of factors that float around in their underwriting minds: i) Over inflated new buy prices meant the lenders lent more than the property was truly worth e.g. google: Thamesmead ii) Builder’s complex incentives – lender’s need to be certain of the true purchase price as it is fundamental to their underwriting principles; iii) property movement – no aging to see how the foundations have settled iv) legally an element of the estate has to be social housing so they generalise in their minds and two plus two equals five and hey presto arrive at undesirable neighbourhood.
Throw New Build Flat or concrete construction into the mortgage mix and the lenders might insist on a 25% deposit.
Lesson 5: Properties with vague boundaries
I think I was once told that the world was flat – it certainly has had many divisions and empires stolen down the years otherwise dare I say the word ‘war’ would not have existed. On a more localised front an ordnance survey plan view of a property can reveal up all sorts of ills. Erections such as outbuildings, garages and garden fences have often crept beyond their supposed band width. Flats above other flats could have inadvertently staggered over the divide and become flying freeholds. Some of these issues can be negated by indemnity insurance whereas others are more pronounced and cause the lenders to recoil faster then Usain Bolt under a false start.
Don’t’ despair – solutions for properties that are unfit for mortgages
In all honesty I could write all day on the Lessons the key thing is there are more than half a dozen residential mortgage lenders on the high street. Not all of them are practical to access as they may have branches in other areas of the country and others simply do not have a high street presence at all. However, a Specialist Mortgage Broker such as Niche Advice could do all the leg work for you. If you dot not have a survey report all you need to email is the Estate Agency Sales Particulars, property number and postcode and we’ll do the research for you.
For more information on Mortgages for Flats above shops please call us on T: 020 7993 2044 or alternatively complete the online Contact form on this website
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.