More often than not, you’ll have an idea what your home report will flag – like single glazing, a dated kitchen, old electrics. But what’s the worst case scenario for someone wanting to put their property on the market? Is unmortgageable really as bad as it sounds?
The long and short of it means that someone will not be able to use a mortgage to purchase your home. A property that is unmortgageable can be difficult to sell, be valued thousands (maybe even 10’s of thousands) less than other homes in the area, or even be totally impossible to sell at all.
Depending on the reason your property is classed as unmortgageable will limit the buyers available. Generally, the more buyers available for your home, the more likely you’ll achieve your asking price. So if there are limited (or possibly no) buyers, then you’ll likely expect to sell at a much higher discount. You may just be relying on ‘cash buyers’ as your only option to sell your home.
- Uninhabitable
If it’s deemed that your property is unfit to live in – it’s derelict, partly derelict, not weatherproof or not secure, then banks won’t lend on it. Sometime the lack of a kitchen, bathroom or working heating system will mean it is unmortgageable. Sometimes you’ll see this if a property was mid-refurbishment and isn’t connected to water/gas.
- Structural problems
A very common reason why a house would be deemed unmortgageable is down to damage from subsidence. But issues can also include damp issues affecting the integrity of the building, wall tie failures or if the flooring is of red ash or some concrete floors.
- Non-standard construction
Commonly built post-war, these building types are usually pre-fabricated concrete build (concrete frame or panel houses), but can also include timber buildings, thatched buildings, cob, mundic, asbestos or corrugated iron. Recently (following the tragic Grenfell Tower fire) many buildings with certain types of exterior cladding are now unmortgageable.
It can be possible to get a mortgage on some of these buildings, but the availability of lenders in Scotland are very low and tend to be specialists and may have high rates to pay for the privilege. Some areas won’t be considered at all – like the highlands.
- Sitting tenants or unregulated tenancies
If there are tenants in the property that have been in place before the Housing Act of 1988 and the implementation date in January 1989, then it they have rights which restrict the ability to remove them from the property or increase rents. Most lenders will not provide mortgages on these properties.
- Low-value properties
Most lenders won’t offer a mortgage on a property that is worth less than £40,000 in Scotland.
- Council/social housing
If there is a high proportion of council or social housing in the area, some mortgage providers might be reluctant to provide lending.
- Damp and rot
Severe cases of damp, dry rot and wet rot will be considered as structural defects and can make a property unmortgageable.
- Subsidence, flooding or coal area risk
Even if the property hasn’t actually been flooded, it could be considered at risk if close to a flooding area. If the property has suffered subsidence in the past that hasn’t been resolved, this would also affect the mortgage-ability. Also within central Scotland, there are many areas of ex-coal mining risk. You can order a report from the Coal Authority or have a look at their interactive map for an initial idea if your property might be affected.
- Commercial
If the property is classed as commercial, or even part-commercial, you may need a specialist lender or to change the building ‘use class’ through the local council planning department. If the property is above or next to commercial, it may also be difficult to get a mortgage in some cases (particularly if it has ‘extended’ opening hours).
- Planning or building regulation issues
If the property (or any part of it) hasn’t been built without the necessary planning permissions, lending would be refused until the property either has retrospective planning accepted, or the changes have been reversed. Some internal changes (such as replacing of windows, changes to the internal structure etc., may need local council approval, so it’s important not check before making any changes (or getting everything approved before putting your home on the market).
- Local development plans
If there are plans for major developments (a new motorway, railway or airport extension) some lenders may not provide a mortgage for properties in the immediate areas.
- High-rise flats
In some cases, banks and mortgage providers refuse mortgages for flats over 5 stories high.
- Restrictive covenants
Although more rare, there are situations where there is an agricultural occupancy clause or local occupancy clause which restricts occupancy to only agricultural workers/local people. This can also be where properties restrict the age of a resident (i.e. an over 50’s development). Your solicitor would be able to confirm if there were any issues before putting your property up for sale.
- Land Registry
If you do not have the deeds for the property and it has never been registered with the Land Registry, then lenders won’t offer a mortgage until ownership of the property has been proved.
- Land disputes
Where there is a dispute with a neighbour about ownership of the land, or where the property goes over or under a neighbours then a mortgage may be refused.
- Invasive weeds
You may have heard about Japanese Knotweed. If they’re found growing on the property or even within the vicinity, many lenders will refuse a mortgage.
So what can I do?
In some cases, it will be possible to resolve the issues. Either with a small investment, or possibly with considerable amounts of money.
It may be worth contacting either a solicitor (if it’s to do with the title, contracts or deed) or a local surveyor to look at the building and give an estimate for the works required. You then may be able to understand the issue and what it may take to resolve.
You can’t ‘hide’ any issues from the buyer as it’s likely that anything will come up on the home report or during the process of purchasing which would only delay or put a complete halt to the purchase. It’s better to be up-front and then be clear about who your potential buyers would be.
A cash buyer may be your best option in some of these options, but be aware that in any of the purchaser types, you’re going to be unlikely to achieve market value as they will have to invest time and money into resolving these issues. You may decide not to move at all, or possibly if the condition allows (i.e no structural issues, is habitable and can comply with all rental regulations) to change to a rental property.
We’re happy to discuss any issue you may be aware of with your property. Get in touch with us to find out how we can help.
