Can You Get a Mortgage on a Grade 2 Listed Building?

Mortgage lenders recognise the national listing process and will look at the Grade and valuers' comments about the condition of the building when considering a mortgage application on a listed building. So, how does property grade listing affect mortgage approval?

• Grade 1 listed buildings usually require the most care, which is why most lenders won't lend on these listed buildings. These properties are more likely to have issues with their structure due to their age, are not always habitable and can be difficult to sell. Only a few providers will lend on Grade 1 listed buildings
• Grade 2* listed properties are more mortgageable than Grade 1
• Grade 2 listed buildings are the most common but require more maintenance than non-listed properties

Listed property mortgages are available, but securing one is not as straightforward as for non-listed homes. Listed properties are considered non-standard construction by lenders and have several implications that can affect resale potential, which is a significant concern for traditional lenders.

For example:

• The property's age may mean it will likely deteriorate more quickly than a standard building and experience a faster decline in value
• Restrictive covenants on the property will make it harder for the homeowner to carry out maintenance, repairs, renovations or remove certain features
• Listed properties often have high maintenance costs and require specialist trades, such as thatchers, and lenders will want to be sure that buyers can afford these costs
• Niche and non-standard construction properties can be harder to resell than standard properties and are typically viewed by lenders as high-risk investments

Grade 1 Listed Building Mortgage

Getting approved for a mortgage on a Grade 1 listed building can be challenging but not impossible. A few lenders will consider lending on a Grade 1 listed building. However, due to their unique restrictions and stringent upkeep and maintenance requirements, only a few lenders can accept these types of properties.

Grade 2 Listed Building Mortgage

It is possible to get a mortgage for a Grade 2 listed building. However, these properties pose a greater risk to lenders than a standard home. Before deciding whether to approve you for a mortgage, lenders will want to assess the property's resale potential in the event of repossession. While many lenders shy away from lending on Grade 2 listed buildings, there are many other mortgage lenders that are more familiar with this type of market. They will offer competitive mortgages for these types of properties.

As is typical with non-standard construction properties, you may find certain restrictions when buying a listed building which could limit your choice of lenders. The seller should declare any restrictive covenants that are on the property deeds. But these will come up anyway during the property survey, so you'll have some warning about any restrictions before you commit to purchasing the property. Some common restrictions you may come across are:

Consents

You'll likely need consent from your local planning authority before you make any changes to a listed building. As listed buildings are protected by law, homeowners must obtain listed-building consent before making any changes to the inside or outside of the property. Making any alterations to a listed building, however minimal, without listed building consent is a criminal offence and you may face prosecution.

Generally, you can use like-for-like materials and methods to maintain a listed building without prior consent. However, if you want to replace window fittings, you must be careful as this could be part of what makes the property a certain a listing.

Repairs and Maintenance

The age and characteristics of a listed building mean that they need more maintenance and repair work than other properties, which often forms part of the lender's terms. While it will need regular upkeep, you can't just use off-the-shelf materials. You may need specialist help which will come at an additional cost. While you’ll want to factor the extra maintenance costs into your budget, lenders often want to include them in their affordability assessments. The lender may decline your application if it determines that your finances aren't sufficient to cover the necessary expenses of maintaining a Grade 2 listed building.

Most lenders will have a set minimum deposit requirement. Grade 2 listed buildings present greater risk than standard properties, so those lenders considering these properties often have more stringent lending criteria.

Most lenders cap the maximum loan-to-value at 80% - 85%, so you'll need to put down a 15% - 20% deposit for a listed building mortgage.

As with any property purchase, a larger deposit will open the door to a greater selection of lenders and more competitive rates. If you present risk in other areas, such as your credit history, a higher deposit may help to sway lenders to consider your application.

Lenders typically use income multiples as an initial starting point, with the standard allowance between 3.5x - 4.5x your annual income. If your annual income is £40,000, you could be offered a mortgage in the region of £140,000 to £180,000. However, this will depend on your circumstances and the specific lender.

Buy-to-let listed building mortgages are available through niche lenders. However, many lenders require you to have prior experience maintaining a Grade 2 listed building. Most lenders will likely decline your application if it's the first Grade 2 listed building you've owned. A specialist mortgage broker such as John Charcol can advise you on the most suitable lenders in these circumstances.

As with all types of mortgages, getting a mortgage on a listed building is possible even if you have a bad credit history. However, the eligibility criteria will vary depending on the lender. The recency and size of your credit issues will also impact a lender's decision. If you’re approved for a mortgage on a Grade 2 listed building despite having bad credit, you may be required to pay a larger deposit and subject to higher interest rates.