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How a Bridging Loan Can Help You Secure Your Dream Property
Tracking down and buying your dream home is never easy. In times of unprecedented housing shortages, competition for desirable homes in most parts of the country is at an all-time high. Unexpected price increases by sellers or the possibility of being outbid by a rival bidder are only two reasons why transactions can and do fail.
In fact, some estimates suggest that as many as 25% of planned property purchases result in disappointment.
With conventional mortgage completion times averaging around 12 weeks, there is ample time for things to go wrong along the way. Traditionally, cash buyers have been afforded the kinds of privileges that have given them a major advantage over mainstream homebuyers.
Today, it is a set of privileges that can be accessed by anyone who owns their current home. If you are planning to relocate and looking to escape the trappings of traditional property chains entirely, a low-cost bridging loan could be just the thing.
How a bridging loan can speed up a transaction
A bridging loan is effectively a fast-access, short-term loan that can be used for any legal purpose. In this context, the funds needed to purchase your dream home are secured against your current property. The more equity you have tied up in your current home, the more you can borrow in the form of a bridging loan.
With all the essential paperwork in place, bridging finance can be organised within a few working days. This means being able to ‘jump the queue’ and beat competing bidders to the punch, with all the flexibility and convenience enjoyed by a cash buyer.
You buy your new home for cash (which may pave the way for a generous discount), you leave your previous home on the market for as long as it takes to sell for its full value, and you repay the bridging loan when your previous home sells. In the meantime, the bridging loan accrues interest at a rate as low as 0.5% per month, making it a much more affordable transaction than any conventional mortgage.
As the name suggests, the facility can be used to ‘bridge’ the gap between buying your dream property and selling your current home. Whereas the process would usually work the other way around (sell first, buy later), bridging finance allows you to buy first and sell later. And in doing so, reduce the risk of having to watch your dream property slip through your fingertips.
Bridging loans: common-sense care and caution
As a bridging loan is issued in the form of a secured loan, you face the risk of your property being repossessed if you do not fulfil your repayment obligations. This is something that must be taken into account and carefully considered before applying for any type of secured loan.
Bridging finance is designed to be repaid in the form of a single lump sum payment, typically 1 to 12 months after being issued. You therefore need to be confident that your previous home will sell successfully during this time in order to provide you with the funds needed to repay it.
A bridging loan is a strictly short-term facility and should not be taken up with long-term repayment in mind. The more promptly a bridging loan is repaid, the lower the interest and borrowing costs that apply.
Before applying for a bridging loan with the purchase of a property in mind, consult with an independent broker to discuss the options available and your suitability for bridging finance.
How Breathing Space Regulations Can Adversely Affect Lenders
Throughout the COVID-19 crisis, tenants and mortgage payers were afforded additional protection from the potential consequences of temporary financial turbulence. Where individuals, families, or businesses were unable to meet their repayment obligations through no fault of their own, they were governed by emergency government legislation. At least, to such an extent as to give the person time to get their affairs in order and to get back on top of their financial commitments.
Recently, figures published by the Ministry of Justice suggest that things are returning to normal. In terms of the basic numbers, warrants and repossession orders are once again back to levels similar to those recorded prior to the pandemic. A significant rise in the number of repossessions commenced or carried out in March was recorded (compared to the same quarter last year), and the ASTL has reported a 31.5% increase in the value of loans in default.
Contrary to popular belief, lenders always approach repossession as a last resort option. Repossession is a costly, complex, and time-consuming process, which ultimately leaves all parties involved out of pocket. Even so, it is a necessary mechanism to enable lenders to safeguard themselves from heavy losses.
The debt respite scheme
Following the withdrawal of COVID-related protections from repossession and eviction, the government introduced the Debt Respite Scheme, also referred to as Breathing Space; the policy came into force on May 4, 2021.
According to the government, the new regulations were introduced to give individuals the time they need to enter sustainable debt solutions and to encourage people to seek advice on their debts and outgoings.
In short, the policy provides those who qualify under its terms and conditions a period of 60 days of ‘breathing space’. During this time, their creditors (and the collection agents representing them) cannot issue any demands or progress with enforcement. However, all interest, fees, and penalties that apply during this 60-day suspension period still apply.
But what seems to have been overlooked by those who drafted the legislation is how a 60-day ‘breathing space’ period can be somewhat disproportionate, from one loan type to the next. The same 60 days apply (if the borrower qualifies), irrespective of whether they are repaying a 30-year mortgage or a six-month short-term loan. In the case of the latter, 60 days would be a full 30% of the entire repayment period—the equivalent of a ten-year hiatus on a 30-year mortgage.
Either way, the latest figures published by the Insolvency Service suggest that the vast majority of those registering under the Breathing Space are perhaps not using the facility in the way it was intended to be used. Of the 49,017 cases accepted during the programme’s first year, 96% of those taking advantage of the scheme ran out of time within the 60-day allotted period. Just 668 entered into a viable debt management solution, while only 222 came up with ways to repay their debts within 60 days.
All of this has prompted calls for the terms and conditions of the policy to be revisited to protect lenders from potential losses. Breathing Space is used most broadly as a way to forestall repossession or eviction, as opposed to its intended purpose of a sustainable debt solution. Lenders have the option of launching counter-challenges against breathing space cases, but the process is long-winded, complicated, and costly.
There is no argument or contention among lenders that well-intentioned debtors should be given the support they need to weather turbulent financial times. The issue is that with policies like Breathing Space, the programme is wide open to abuse and exploitation.
Title Fraud a Growing Threat to More Than 97% of UK Homes
Rapidly rising levels of “title fraud” are prompting homeowners in record numbers to register for property alerts with the Land Registry. Alarmingly, research suggests that as many as 97% of homeowners face the threat of their properties being sold illegally, without their consent or their knowledge.
Between 2020 and 2021, the Land Registry recorded a 300% increase in the number of people registering for property alerts. New data published by Third fort based on a Freedom of Information request suggests that title fraud is being taken seriously by more homeowners than ever before.
Even so, the numbers indicate that just 515,000 property owners have so far registered for the service, which is free of charge for all homeowners in England and Wales. This equates to just 2.5% of all property owners across the two countries.
Around 135,000 people registered their homes in 2021, up from 46,000 in 2020. Meanwhile, 110,000 have signed up so far this year. This leaves 97.5% of properties unregistered for the service or 20.3 million homes.
Speaking on behalf of Third Fort, Olly Thornton-Berry highlighted the extent of the problem.
“Fraud is a huge problem in the UK property market,” he said.
“We’ve seen some alarming instances of fraudsters acquiring ownership of properties using forged documents to impersonate registered owners. Empty properties, tenanted properties and those without a mortgage are particularly at risk.”
The importance of property alerts
Late last year, a homeowner from Luton returned to his property after spending a period of time in Wales on business. Only to find that when he arrived home, somebody had moved into his house, replaced the locks and started to renovate his property.
An investigation conducted by the BBC found that he had fallen victim to identity theft and that his house had been sold fraudulently in his absence.
This represents just one of many instances of title fraud (and attempted title fraud) that take place across England and Wales each year. By signing up for free alerts, it becomes possible to thwart the attempts of fraudsters by receiving a notification the moment suspicious activity is detected.
As explained on Gov.co.uk:
“We will send you an email alert each time there is significant activity on the property you are monitoring, such as if a new mortgage is taken out against it.”
“The alert will tell you the type of activity (such as an application to change the register or a notification that an application may be due), who the applicant is and the date and time it has been received.”
“Not all alert emails will mean fraudulent activity. If you don’t think the alert email is about any suspicious activity, you don’t need to do anything.”
“Signing up to Property Alert won’t automatically stop fraud from happening. You will need to decide if the activity on the property is potentially fraudulent and act quickly if so. The alert email will tell you who to contact.”
Who is eligible for automatic alerts?
The official government page for Land Registry property alerts outlines the following eligibility requirements for the free service:
- The property you want to monitor must be situated in England or Wales and registered with HM Land Registry
- You must create a Property Alert account to use the service
- You will receive an HM Land Registry email (please check your spam inbox) to enable you to verify your email details
- You must then sign in to your account to add a property
- Email alerts are sent when official searches and applications are received against a monitored property
- If you receive an alert about activity that seems suspicious you should take swift action. The alert email will signpost you to whom to contact.
- You don’t have to own a property to set up an alert
- The same property can be monitored by different people.
- Property, especially flats, can be registered with two titles. Blocks of flats are often owned by companies (Freehold), and the person owning the individual flat (Leasehold). When registering for this service please choose Leasehold title for individual flats.
- You can use the service if you are not online. Call the Property Alert team on 0300 006 0478.
Source: Gov.co.uk
London Property Purchases Account for One-Third of All Stamp Duty Collected
A study conducted by Access Legal, a law technology specialist, has revealed a major disparity in the amount of stamp duty being paid back to home buyers in some regions of the country compared to others. Having analysed average stamp duty payments across 100 major towns and cities, Access Legal found that almost two-thirds of total UK stamp duty contributions come from just one region.
Over the six months following the return of regular stamp duty rates, the Treasury collected £679 million in stamp duty payments from these 100 towns and cities. Of which, approximately £442 million was generated entirely from property sales in London.
Bristol came in at second place with a comparatively paltry £19.1 million in stamp duty contributions, followed by Reading with a combined £9.78 million in stamp duty bills.
The top five stamp duty land tax contributors were rounded out with Cambridge and St Albans.
Londoners paying more than £26k for SDLT
Given the disproportionately high property prices in and around London, it came as no surprise that home purchases in the capital carried the highest stamp duty payments. On average, property purchases in London were found to have a stamp duty requirement of £26,133.
The second and third most expensive stamp duty regions of the UK are St Albans and Oxford, where home buyers can expect to pay £21,213 and £18,976, respectively.
Access Legal also found that all 10 of the top-paying stamp duty towns and cities were in the south, while all 10 lowest-paying towns and cities were in the north. Specifically, total combined SDLT contributions were found to be the lowest in Blackpool, Hartlepool, Bradford, Hull, and Sunderland.
The temporary stamp duty holiday came to an end some time ago, but there is still an exemption on property purchases up to a value of £300,000. Given the major differences in average house prices across different regions of the UK, it comes as no surprise that stamp study contributions also vary significantly from one area to the next.
In Blackpool, for example, the average stamp duty payment on properties purchased over the six-month period was just £341.
Demand remains high, outstripping available inventory
Commenting on behalf of Legal Bricks, a leading conveyancing software provider, director Mike Connelly suggested that the withdrawal of the stamp duty holiday has had little to no impact on buyer demand.
“We all know that buyers pay a premium to live in the South East, especially London, but the figures show just how much they’re paying in stamp duty tax alone compared to people in other parts of the country,” he said.
“First-time buyers, in particular, who also have to pay thousands of pounds in SDLT, will see a real dent in their deposits or have to borrow more on their mortgage to pay it. This suggests that even with the SDLT holiday coming to an end, demand for housing in some parts of the country has continued to be high.”
Meanwhile, mortgage expert at Mojo Mortgages, Claire Flynn, praised the temporary stamp duty holiday for helping many first-time buyers find their way onto the UK property ladder.
“The stamp duty holiday was good news for many, seeing house sales reach record levels and helping to alleviate some financial pressure of buying a property for first-time buyers and existing homeowners,” she said.
“While first-time buyers still benefit from an exemption on properties up to £300,000, house prices are currently at record highs, which means we’ll likely see a considerable increase in the number of new homeowners paying for stamp duty.”
“This will be exacerbated by the end of the help-to-buy scheme in March 2023, which could make it even more difficult for those trying to get their foot on the property ladder in areas such as London, Bristol, and Reading where the average cost of a home exceeds the £300,000 exemption threshold.”
Housing Crisis Prompts Skyrocketing Demand for Property Guardianship Positions
Relocating can be stressful at the best of times, but it is nonetheless an everyday part of life for the UK’s estimated 10,000 property guardians. Property guardianship is a popular, recognised, and heavily regulated concept in some other European countries, but it is uncommon in the United Kingdom.
But for those who are able to assume the role of property guardian, the potential benefits can be huge.
Property guardians pay property management companies a set fee to live in (and take basic care of) properties that would otherwise be empty buildings. This could be anything from a disused retail building to a vacant office complex to a historic listed building. Property guardians need to be flexible, as they can be asked to leave (and/or relocate to another property) at any time with just four weeks’ notice.
In return, property guardians get to live in these unused properties for an average of just £350 per month—significantly less than the cost of renting a single room in even a fairly modest property.
Health and safety regulations
In order for a vacant property to be let out to a guardian, it needs to be in a suitable state of repair and comply with all basic health and safety legislation. This means it must have appropriate cooking, washing, and sleeping facilities, along with reliable access to basic utilities, in a generally safe and secure environment.
The guardian is essentially an employee of the real estate management company, taking basic care of the building on their behalf. For the property management company, significant savings are made on the costs of formal property upkeep and hiring security firms or guards to watch over their properties.
Growing demand
Record-high monthly rents coupled with the escalating living-cost crisis have resulted in a major spike in demand for guardianship places, according to the Property Guardian Providers Association (PGPA).
It is estimated that there are currently around 10,000 property guardians in the UK, but the number is expected to swell to more than 50,000 by the end of this year. According to the PGPA, no less than 32,000 people submitted applications to become guardians over the past 12 months.
The PGPA has warned that the sector is unlikely to be able to meet growing demand due to general shortages of available inventory. In addition, increasingly tight regulations placed on properties are making it difficult for property management companies to hire guardians for some types of buildings and premises.
But while a lack of long-term stability and being forced to relocate regularly bring issues, most of those taking part in the scheme believe that the pros vastly outweigh the cons.
In addition, potential security concerns regarding these vacant properties are apparently unfounded, according to the chair of the PGPA.
“The security aspect that guardians provide is simply by being in occupation,” said Graham Sievers, pointing out that vacant buildings without guardians are far more likely to attract squatters and anti-social behaviour.
“The guardians themselves are not expected to be security officers or patrol the building.”
Mr Sievers also said that by no means is the guardianship scheme aimed exclusively at vulnerable people in desperate financial situations.
“We’ve had people who are approaching retirement—teachers, for example—turning to guardianship so that they can save up money to buy their ideal cottage,” he said.
Meanwhile, the Department for Levelling Up, Housing, and Communities released a statement suggesting that such schemes should be approached with due care and caution.
“We do not endorse or encourage property guardianship as a form of housing,” read the statement.
We recognise, however, that people have the right to make their own informed decisions about their housing choices, and property guardians and local councils should follow our extensive guidance on their rights and responsibilities.”
The Benefits of Private Lending as Development Finance
As economic uncertainty continues to escalate, the UK’s biggest banks are becoming increasingly inflexible. Strict lending regulations coupled with complex in-house policies are making it more difficult than ever to qualify for specialist funding on the High Street.
Property developers and real estate investors in particular are feeling the pinch. Potentially lucrative projects are being left in limbo, or in some instances, failing to even get off the ground in the first place.
But this lack of flexibility and product availability on the High Street need not spell doom and gloom for investors and developers. It simply calls for a search for affordable funding beyond the High Street, which is where private lending comes into play.
A rapidly evolving segment
Demand for the kinds of flexible financial services that simply do not exist on the high street is being met by a rapidly expanding specialist lending sector. Across the UK, dozens of private lenders have gone into business to effectively (and in some cases literally) ‘bridge’ the gaps in the services provided by mainstream banks.
From bridging loans to auction finance to specialist development finance, it’s all available from an extensive network of private lenders.
What makes this specialised lending sector unique is how all applications for funding are assessed individually. None of the usual ‘binary’ application criteria apply; all requests are considered based on their broader merit.
This means that rather than being offered a limited range of off-the-shelf products, loans and development finance facilities are built from scratch to meet the exact requirements of the client. As a result, they get exactly what they need at a price they can afford, with terms and conditions that suit both the borrower and the lender.
The advantages of private lending
Seeking support from a specialist lender (as opposed to a mainstream bank) can be beneficial in the following ways:
- Flexibility: All aspects of the facility can be tailored to meet the unique requirements of the applicant. This includes LTVs as high as 90% or more, a wide variety of repayment options (loan terms) to choose from, and the option to ‘roll up’ interest into the final repayment.
- Accessibility: None of the normal restrictions apply when seeking financial support from a specialist lender. Even with poor credit, a history of insolvency, and/or no formal proof of income, it is still possible to qualify for flexible and affordable products like bridging loans.
- Speed: With all required paperwork and documentation in place, bridging loans and development finance loans can be arranged within a few working days. On the High Street, the closest comparable products could take weeks (if not months) to underwrite.
- Affordability: Interest rates and overall borrowing costs are always open to negotiation with specialist lenders. Some short-term facilities can be taken out for as little as 0.5% per month, with no initial arrangement fees, admin fees, or deposit payments required.
- Freedom: Importantly, specialist lenders place few (if any) restrictions on how their products can be used. While traditional banks limit their loans and mortgages to very specific purposes, similar products from specialist lenders can be used for any legal purpose.
It is also possible to request a decision in principle on a bridging finance or development finance application without posing a risk to your credit score.
Far from a last resort, more businesses (and mainstream borrowers) than ever before are setting their sights on the UK’s growing specialist lending sector. With the support and representation of a skilled broker, a product search that goes beyond the High Street can pave the way for significant savings.
Not to mention, it is a far faster, easier, and less stressful experience than applying for funding via conventional channels.
For more information on any of the above or to discuss property development finance in more detail, contact a member of the team at UK Property Finance today.
Johnson’s New Mortgage Affordability and Right to Buy Plans Prompt Outrage: Here is How We Can Help
There was never any doubt that Boris Johnson’s plans to help as many Brits as possible get on the housing ladder would be anything but a big disappointment. We already knew much of what he was going to say before his already infamous remarks were voiced in Blackpool this week.
“We’re going to look to change the rules on welfare, so 1.5 million working people who are in receipt of housing benefits and want to buy their first home will be given a new choice: to spend their benefit on rent as now, or put it towards a first-ever mortgage,” he said.
“Doing so removes a significant barrier that currently prevents hundreds of thousands of families from buying their own home.”
“We’re going to explore discounting lifetime and Help to Buy ISA savings from Universal Credit eligibility rules”.
Support for ‘trapped’ housing association tenants?
In addition to the above, he talked about an extension to the existing Right to Buy scheme, which will give up to 2.5 million housing association households the opportunity to purchase their properties at a discounted price.
“They’re trapped; they can’t buy; they don’t have the security of ownership; they can’t treat their home as their own or make the improvements that they want,” he said.
“So, it’s time for change. Over the coming months, we will work with the sector to bring forward a new Right to Buy scheme.”
All of this is somewhat predictable, as was the reaction from those within the housing and mortgage sectors who were quick to lambast the ailing prime minister.
“There are real practical problems; to qualify for Universal Credit, you’ve got to have savings of less than £16,000, which means that most people who the government is trying to reach with this announcement are not going to have anything near the amount that they need for a deposit,” said Shadow Levelling Up Secretary.
Her sentiments were echoed by Edward Checkley, managing director of London-based property finance specialists, who highlighted the dangers of plunging struggling households into further debt.
“This policy would go against all sensible lending practices, considering housing benefit is typically awarded to assist with rental payments if unemployed or on a low income, and to households with less than £16,000 of savings,” he said.
“With the cost-of-living crisis already affecting lower-income households, how can saddling them with debt be responsible?”
Elsewhere, the founder of Mansfield-based Shaw Financial Services, Lewis Shaw, gave the prime minister both barrels and joined the growing call for his resignation.
“Mortgage lenders already allow people to use state benefits to support a mortgage and have done so for years. It varies from lender to lender exactly which state benefits they’ll take into account, so I’m not sure what a new policy could be,” he said.
“It’s almost as though they don’t know how the mortgage market works already. If we’re to believe they want higher LTV mortgages, there’s only one place to go, and that is 100% LTV. However, again, we already have 100% LTV as a couple of lenders allow you to take a personal loan as a deposit.”
“It’s more bluster from the blond blancmange. Just resign for God’s sake and let someone with an ounce of competence and integrity have a crack.”
The ‘strength in numbers’ approach to home buying
Increasingly, millions of prospective first-time buyers are counting themselves out of the running as far as home ownership is concerned. Even when coming up with the required deposit to qualify for a mortgage is possible, skyrocketing house prices are pricing many out of contention.
With average house prices now hovering around £300,000, lenders’ policies on salary-based maximum mortgage sizes are proving increasingly unrealistic. Capped at around 4.5 times the applicant’s salary, even a £35,000 per year earner would fall drastically short of the mark.
A mortgage of £157,000 has been more or less useless across much of the UK for years, thus painting an even more unfortunate picture for many millions earning closer to £20,000.
This is where a product known as a Joint Borrower Sole Proprietor (JBSP) mortgage could help; a JBSP mortgage works by effectively combining the annual incomes of up to four family members in order to increase the maximum loan amount.
Responsibility for the mortgage is effectively shared between all who sign in to the agreement, usually the person or couple looking to buy their first home, and the parents of one of the buyers.
Like a conventional mortgage, a JBSP mortgage can be taken out with an LTV as high as 95%. Maximum loan sizes and terms vary on the basis of the ages of the supporting applicants, and all borrowers named in the application must be in employment at the time.
Where the conventional pathway to homeownership seems implausible at best, considering the alternative options with the help and support of an experienced broker is highly recommended.
For more information on any of the above or to discuss the benefits of joint borrower-sole proprietor mortgages in more detail, contact a member of the team at UK Property Finance today.
How to Mortgage an Uninhabitable Property
Uninhabitable homes are not without their points of appeal. Particularly in today’s housing market, an affordable ‘fixer-upper’ can be just the thing to sidestep impossibly high property prices.
With an uninhabitable home, you have the opportunity to buy into a desirable location and gradually shape it into the home of your dreams. Unfortunately, the vast majority of lenders fail to see the potential in these ‘non-standard’ homes.
Consequently, most homes considered uninhabitable at the point of sale are also considered unmortgageable. As the name suggests, this means that conventional borrowing options are out of the question.
But this doesn’t mean that affordable financing for uninhabitable properties is unavailable. It simply means you have to extend your search beyond the High Street with the help and support of a specialist broker.
What makes a home uninhabitable?
All lenders have their own policies regarding which types of properties are considered unmortgageable.
In most instances, any of the following will classify a home as uninhabitable:
- There is no working bathroom or kitchen inside the property.
- Inadequate protection from adverse weather (windows and rain)
- Issues with mould or dampness that could be unhealthy
- Staircases considered dangerous or in an unsafe condition
- A lack of basic security, such as solid doors and locks
- Any kind of non-standard material used in its construction
- The presence of asbestos or Japanese knotweed
- Any potentially dangerous structural issues
Even if the required repairs and renovations are fairly straightforward, securing a conventional mortgage for homes affected by these issues is practically impossible. Irrespective of how cheap the property may be and the applicant’s financial status, their request for funding will be refused outright.
Does the property need a working bathroom and kitchen?
These are the two rooms major lenders consider most important of all when it comes to a home’s appropriateness for habitation. If either the kitchen or bathroom is not in good working order and in acceptable condition, a mortgage will not be issued against the property.
This applies to both home buyers and buy-to-let investors alike, who are restricted to properties with functional bathrooms and kitchens. Even if the buyer’s plan is to tear out both rooms and have them fully refitted, their application will be rejected.
Does the property need to be weatherproof?
Yes, an appropriate level of weatherproofing is needed for a home to qualify for a conventional mortgage. This basically means that whatever the weather, the occupants of the property and its structural integrity must be sufficiently protected.
How about central heating?
Policies again vary with regard to central heating, given how many older properties do not feature such installations. The surveyor’s report on the property will usually determine the outcome, as they may deem the property to be safe, warm, and habitable in the absence of a central heating system.
Are listed buildings categorised as unmortgageable?
It depends entirely on their state of repair at the time they are placed on the market. Even so, qualifying for a mortgage for a listed building can be complex and long-winded.
During the inspection, it is highly likely that the surveyor will uncover a long list of essential repairs and specialist restoration requirements; the older the property and the more unusual its configuration, the higher the likelihood of ‘non-standard’ issues affecting its eligibility for a mortgage.
If you are considering purchasing a listed property of any kind, consult with an experienced broker in advance to discuss the available funding options.
Does asbestos render a property uninhabitable?
The presence of asbestos is always concerning, but its location and prevalence will determine whether it affects the mortgage on a property.
For example, if asbestos is present in small quantities and has not been damaged, a mortgage valuation may simply recommend its removal before the purchase goes ahead. Likewise, an undamaged asbestos roof is not frowned upon in the same way as other asbestos-containing materials and components.
But if the presence of asbestos in a property is deemed a direct threat to the safety of its intended occupants, it is highly unlikely it will qualify for a mortgage.
What is a non-standard roof in mortgage terms?
Mortgage lending policies based on roof materials and configurations differ from one lender to the next. Some types of roofs that could make it more difficult to qualify for a mortgage include the following:
- Flat Roofs With a flat roof, it will typically be the condition of the roof and the materials it comprises that determine whether it affects mortgage eligibility.
- Felt Roofs: Many mortgage providers consider felt roofing to offer inadequate protection and may therefore refuse to lend against homes that feature it.
- Thatched Roofs: Qualifying for a mortgage with a traditional thatched roof can be surprisingly difficult unless comprehensive evidence of its condition and safety can be provided.
- Tin Roofs: Several factors are taken into account when assessing mortgage eligibility for homes with tin roofs, including their size, configuration, and general state of repair.
If you are considering buying a property that may be affected by any of the above issues, call UK Property Finance anytime for an obligation-free consultation.
Mortgage valuations after essential repairs
Some lenders will agree to issue mortgages for ‘problematic’ properties like those listed above, but only after the required repairs and renovations have been conducted. The process involves feeding back to the estate agent or vendor and requesting that the work be conducted on your behalf.
Unfortunately, this means spending money on a home that you have not yet taken ownership of. In addition, there is no guarantee that the lender will subsequently issue a mortgage if they are not completely satisfied with the condition of the property.
It is therefore a completely unrealistic option for most prospective buyers and one that must be approached with extreme caution.
Bridging loans for uninhabitable property purchases
One of the simplest and most affordable ways to fund the purchase of an uninhabitable home is with bridging finance. A bridging loan is a strictly short-term facility for major purchases and investments, with significantly fewer restrictions than those that apply with conventional mortgages.
From uninhabitable homes to auction property purchases and more, a bridging loan can be used for any legal purpose.
Here is how bridging finance can be used to purchase an uninhabitable home:
- A property in need of a new kitchen and bathroom goes under the hammer at auction for significantly less than its true market value.
- The buyer obtains pre-approval for a bridging loan to cover the costs of the purchase and the subsequent renovations.
- Their bid is successful, they pay the 10% deposit on the day, and the bridging loan agreement is finalised.
- The funds needed to pay for the property and the necessary renovations are released within a few working days.
- The property purchase goes ahead, and the remaining funds are used to install a new kitchen and bathroom.
- At which point, the home is once again considered habitable and is eligible for a conventional long-term mortgage.
The short-term bridging loan can subsequently be transitioned to a standard mortgage, enabling the buyer to repay the balance on their home over several years or decades. In the meantime, the bridging loan has been accruing interest at a rate of around 0.5% per month, adding up to a hugely cost-effective transaction.
For more information on bridging loans for uninhabitable property purchases, contact a member of the team at UK Property Finance today.
Can I use a second-charge mortgage to buy an uninhabitable property?
Another option for getting around the usual mortgage obstacles is to consider a second-charge mortgage. This is where you take out a second mortgage against the equity you have built up in your home.
For example, if you have repaid £200,000 on your £300,000 mortgage, you have £200,000 in equity. This could then be used to procure a second-charge mortgage with an LTV as high as 75%, enabling you to borrow around £175,000 against your current home.
These funds could then be used to purchase an unmortgageable property as a cash buyer, and the second-charge mortgage can be repaid when your property sells.
If you have built up enough equity in your current home, this can be one of the most cost-effective ways to invest in an uninhabitable home.
For more information on any of the above or to discuss uninhabitable property investments in more detail, contact a member of the team at UK Property Finance today.