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Unmortgageable Properties

15th November 2023

By James Jones

Unmortgageable properties are normally unsuitable for long term finance.

But don’t despair.

Some lenders will consider lending standard mortgages against properties which most other lenders consider unmortgeable.

There are many reasons why a property could be “unmortgageable.” But, just because a property is unmortgageable, that doesn’t mean that you shouldn’t consider it. You could use bridging finance to help with the maintenance, upkeep and renovating of the property. As a result, you can then make the property mortgageable whilst also potentially making a decent return.

Unmortgageable properties are also subjective depending on the specific bank or lenders policies and evaluations. Some banks and lenders will not even give unmortgageable properties a second thought due to the risks involved. Others may consider an unmortgageable property but interest rates could spike up considerably. Also, they could offer a lower loan to value (LTV) on the property or demand a higher deposit from the borrower. 

What makes a property unmortgageable?

Numerous factors can play into a property being deemed unmortgageable. These factors include:

Derelict Property/Property with structural integrity issues

Properties that are derelict are not suitable for habitation. As a result of this they are not eligible for a mortgage. However, once the property has been properly restored, it should be mortgageable. As work on a derelict property could be expensive, bridging finance could cover the cost of getting the property habitable again.

There are some mortgage lenders which will still lend on property with structural problems. It will depend on the issue and the available equity. Discuss it with a good broker.

Properties worth less than £50,000

There are always the odd few properties available with a low value. If the location and the condition of the property are not desirable, you could see properties with asking prices sub £50,000. Most brokers and lenders don’t usually cater loans for properties of low value. On the other hand, with bridging finance, you may be able to borrow a lesser amount to help increase the value of a low value property. 

Properties lacking Kitchen and/or bathroom facilities

One of the key features a house needs is a working kitchen and bathroom. Most derelict buildings lack these facilities. However, buildings in mortgageable condition without these facilities would also be deemed unmortgageable by most lenders. A bridging loan could help cover the costs of installation and redecoration.

Sometimes, the kitchen or bathroom may have been removed as part of a refurbishment project. Unluckily, that’s just the point many people run out of cash and find they can’t then get a mortgage to finish the work. Sometimes there is a workaround, without using bridging finance. Explain the situation to your broker so he can suggest solutions.

Short leasehold property

With the purchase of a leasehold property, you then become a long term tenant on someone else’s land. The landlord or freeholder still technically owns the land the property sits on. When the lease is up, ownership will revert back to the freeholder so it is important to extend the lease in this scenario. Property with a short leasehold are also deemed unmortgageable by most lenders. Short lease by definition is any lease on a property that is below a term of 80 years although some lenders accept less. Bridging finance or a mortgage or secured loan can help raise the money you could need to arrange a lease extension on a property.

Japanese Knotweed

Despite only being a plant, Japanese Knotweed can potentially cause massive problems for properties. It is an invasive plant that is surprisingly resilient. Plus, Japanese Knotweed grows rapidly and is difficult to remove. However, the biggest issue with Japanese Knotweed is that it has the capability to cause serious damage to pavements and property foundations. Therefore, a property infested with Japanese knotweed is deemed unmortgageable by most lenders. It requires specialist removal which could potentially be costly. Bridging finance can help with the costs brought about by the removal.

Buying property at auction

It can be tempting to buy property at auction to pick up a great deal. But beware as this is where some vendors sell property with an inherent problem.

See our video on buying at auction below:

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Also, If you have plans to refurbish an unmortgageable property with plans to rent out once its habitable; check out this video on bridge to let finance:

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Alternatively you might want to purchase, refurbish and then sell. For refurbishment loans check out this video.

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How to make unmortgageable property mortgageable

Bridging finance has a multitude of uses in relation to unmortgageable property. Firstly, you could use bridging finance to help you buy a house at auction. Also, because unmortgageable properties are usually cheaper due to their nature, you shouldn’t have to borrow as much money to obtain the property.

Assuming you already own an unmortgageable property, you could also utilise bridging finance to help with refurbishment and renovation costs. So once work is complete, assuming the property is now mortgageable, you could use the sale of the property to then pay back the bridging loan. Alternatively, you may be able to secure long term finance that would allow you to pay the bridging loan back.

To summarise, the flexibility of bridging finance could be the ideal way to get a property mortgageable again. Whether you need kitchen and/or bathroom fitting or major work on a derelict property, bridging could help you turn a cheap property into an expensive one. Get in touch with Promise Money if you feel like bridging could be an option for you. We can discuss your options all on a no fee, no commitment basis.

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    Promise Money is a trading style of Promise Solutions Ltd – Company number 04822774
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