As a mortgage broker, it is our job to know mortgage lenders criteria inside out so we can give you informed, up-to-date advice based on which lender is most appropriate for you. If your mortgage broker is not putting you with the cheapest bank, it should only be because they know this bank will not lend to you, unless you have discussed another reason why. Remember too, cheapest doesn’t mean the lowest interest rate – don’t get caught out by that!
So back onto criteria, there are many areas in which banks criteria differ. The most obvious being each bank will use their own affordability calculations meaning two banks could lend vastly different amounts to the same person. Adverse credit history, employment history, address history, citizenship status, income type, portfolio status for BTL landlords, monthly expenditure, credit commitments are just a few examples of things different banks will treat differently. However, with all of the above, the criteria is generally clear from the outset so your broker will not submit an application to a lender if you will fall short of their criteria. Property criteria is an exception. This is because it is not the lender themselves who assess the suitability of the property for a mortgage. This is outsourced by the bank to independent surveyors who assess the property and complete a valuation report on behalf of the prospective mortgage lender.
The following represent a handful of examples of “properties difficult to mortgage” which not every lender will be happy to lend against. While they’re possible to mortgage, the choices are limited and you will need to be more patient, particularly if a lender declines the application based on the valuation report from the surveyor.
Large Acreage – Whether it’s a manor house set in expansive grounds or a modest home located in rural countryside, these properties often come with large acreage. Under 5 acres and most lenders are happy to mortgage the property but once you start going over single digits, the options become very limited.
Refurbishments – “A doer-upper!” These properties will always be popular as people see them as a great investment to rent out or a blank canvas to design their own home from scratch. However, in order to secure a mortgage against the property, it can’t be a total wreck. Most lenders will require kitchen facilities and a bathroom to be in working order and the property must be deemed habitable in its current state. If this is not the case, a self-build mortgage or even a bridging loan can act as a funding solution to get the properties to the standard required for a normal mortgage.
Non-Standard Construction – Whether it be properties built with unusual materials or in an unusual fashion, lenders can be hesitant to lend on this kind of property. Traditional construction methods, most commonly brick walls and a tiled roof, or modern methods of construction, most commonly a timber frame structure, are preferred.
Commercial – Many lenders are not happy with what they describe as a commercial presence. Examples include flats above shops, houses next to petrol stations and properties in a town centre. Lenders have to consider the saleability of the property should they need to repossess. Circumstances obviously vary significantly depending on the extent of the “commercial presence” and in most circumstances, there is a lender happy to offer a mortgage.
Student Density – An increasing issue, particularly in cities where there are pockets with high student density. Many councils are not renewing HMO licences in areas where the density is especially high and therefore lenders are more cautious when offering mortgages on these types of properties. If you’re looking to purchase a residential property in one of these areas, banks are also cautious due to saleability and the fact that many people are committing mortgage fraud and illegally letting their properties out without the required “consent to let” from the mortgage provider.
Deck access – Large blocks of flats, usually those built many years ago, often have their access outside along what is referred to as a deck. For many lenders this is simply a decline as they don’t deem these properties suitable security for a mortgage.
Studios – Apartments where everything is essentially in one room, bar bathroom facilities. These are especially common in big cities where space is limited and people are willing to sacrifice size for location. Some lenders simply choose not to lend on these types of properties and nearly all lenders place a minimum size requirement on the property. If you’re looking at buying a studio whether it be for you personally or to rent out, it’s worth knowing if the property will be suitable for a mortgage first.
While mortgage lenders often give out extensive guidelines around what properties they’re happy to lend on, the key is it’s often only guidelines… It seems we’re seeing lenders increasingly broadening property criteria with the caveat that it’s always “down to valuers’ comments”. This implies they’re wanting to get more applications in the door before then cherry picking what they want to lend on. If you have concerns over the “mortgageability” of a property you’re looking to buy, remortgage or sell, feel free to get in touch!