Mortgages on Uninhabitable Property

Most lenders will agree that a property doesn't have to be in pristine condition to be considered habitable, but it must be warm, dry, safe, secure and meet the following basic requirements:

Most lenders won't offer a mortgage on a property that doesn't have a functioning kitchen or bathroom facilities, which is why you’ll typically require specialist finance such as bridging. You may also struggle to get a mortgage if the property isn't secure, weatherproof or self-contained, as these put the property at a higher risk which could impact their resale value. These issues may also affect your ability to get building insurance, which you need for any homeownership.

A listed building that is uninhabitable is even more complicated to get a mortgage on. Whether a lender will accept this type of property will depend on their criteria. Any restoration work that needs to be carried out on a listed building must be in keeping with the existing materials and appearance of the property while being carried out by specialist restorers. It's a good idea to get advice from an independent mortgage broker to help you find the best lending solution.

Until the 1990s, it was common for asbestos to be used in properties across the UK. Over time, it has become clear that asbestos can pose a serious issue for health reasons and can be very expensive to remove.

Despite this, asbestos can be removed fairly quickly and safely by an expert. Mortgage lenders will require an asbestos report from an accredited surveyor to determine if the asbestos poses a risk. If it's determined that the asbestos should be removed, the lender will consider the surveyor's findings and recommendations before deciding whether or not to make a mortgage offer. Asbestos roofs aren't usually a significant problem if the roof is generally in good condition and doesn't require any repairs.

To get a mortgage on an uninhabitable house, the property must be weatherproof and secure. If a leaking roof causes damage, the lender may consider the property too great a risk and reject your mortgage application. You may also struggle to get building insurance, which is a mandatory requirement for all lenders. This could result in either extremely high premiums or you have to buy the property outright in cash.

You can use a second mortgage to purchase an uninhabitable property, by releasing equity in a property you already own. A second charge mortgage is a type of loan secured against  your existing property. It’s separate from you existing mortgage, otherwise known as a first charge. Depending on how much equity you have in your existing property, you may be able to raise enough to purchase the property and cover the repair costs. Once the property is of a good enough standard, you can then look at remortgaging the former uninhabitable property in the usual way.

Bridging finance is a great option for purchasing an uninhabitable property. Bridging lenders charge higher rates and require bigger deposits to make up for the risk they’re undertaking by lending on an uninhabitable property. Bridging is a short term solution – you typically take out the loan to purchase and carry out work on the property, then once the work is completed, you remortgage onto a normal mortgage product or sell the property. You typically take out a bridging loan for 6 – 12 months, during which you repair or develop the property.

Even if your mortgage application has been declined before, you can still get finance. The options available to you include:

• Submit a mortgage application to a different lender who may view the habitability issues more favourably
• Apply for an alternative form of financing such as bridging to buy the property and complete the repair work then remortgage with a new lender

If you require specialist finance for an uninhabitable property you’ll need to use a mortgage broker like John Charcol.

Transforming a dilapidated building into a beautiful and liveable modern home may seem appealing, but the reality of getting a mortgage on an uninhabitable property should not be taken lightly. You’ll likely require specialist finance in order to purchase the property and carry out any necessary work.

Fortunately, John Charcol is there to help. If you’re looking to buy a property that might be deemed uninhabitable and want to review your mortgage and finance options, speak to our team of independent advisers at John Charcol.

We have access to an extensive range of mainstream and specialist mortgage products, including those for uninhabitable and derelict properties. Get in touch with us today on 0330 433 2927 or submit an online enquiry.