Six Reasons why a Property is Unmortgageable

In this two-minute read, we look at reasons why a property may be classified as unmortgageable.

Selling a property can be tricky at the best of times, but when a property is deemed unmortgageable things can get complicated.

‘Unmortgageable’ means lenders won’t allow a potential buyer to borrow the money they need to buy a property. For many sellers, this can be a knockout blow and can significantly reduce their options.  

Here are five common reasons why lenders won’t finance a purchase.

1 The Propety is uninhabitable

This applies to derelict properties, buildings that have been abandoned, that pose safety risks or are considered not weatherproof. In addition, properties without a kitchen or bathroom may also be classed as unmortgageable. 

As a buyer, you may have big plans to restore a dilapidated property, but a lender may take a different view. If this is the case, always seek financial advice to learn how else you could finance the purchase.

2. Structural problems

If a property resembles the Leaning Tower of Pisa, chances are it’s got a bad case of subsidence – another big no-no for lenders. Other structural issues affecting whether or not a property is mortgageable include severe damp, dry or wet rot.

3. Short lease

If you spot a flat on the market for well below market value, it may have a short lease (under 70 years). A short lease knocks thousands off the value of a property as a buyer may struggle to get a mortgage (if they can get one at all). They’d also have to pay for a lease extension. This is costly (and can take ages) and there are often restrictions around how long you can own a property before applying for a longer lease.

4. Proximity to commercial or industrial sites

Lots of people live above shops so obviously these properties aren’t unmortgageable, but they aren’t always given regular residential mortgages. Particularly if they are above shops such as dry cleaners or restaurants (where there’s a high risk of fire/smoke damage). Similarly, if you buy near a factory or industrial site, a lender may be more reluctant to provide a mortgage as it may be difficult to sell on.

5. Doesn’t comply with building regulations

Sometimes extensions or building work is carried out without the necessary approval, or doesn’t meet strict building regulations. This can hamper a sale as a lender will need to see the necessary permissions/certificates to provide a mortgage.

6. External cladding

At the time of writing and likely to be around for some time is the issue of the safety of external cladding, usually associated with apartment blocks. The awful result of a fire at the Grenfell Tower block in London has led to many residential blocks being deemd unsafe, as the external cladding is not to the required specification. To obtain a mortgage on such an apartment, the mortgage provder will require an EWS1 form (External Wall System Fire Review certificate) without this certificate it is very unlikely that a mortgage will be granted.

Speak to us at Belvoir Cardiff and Pontyridd to find out how we can help you sell an unmortgageable property.