Find a loan for ANY home
Has a property hurdle turned your hopes upside down? Here’s how to get a mortgage if you don’t fit the standard mould...
WHEN it comes to lending on property, banks and building societies prefer to help the usual suspects. Applicants with regular income, a squeaky clean credit record, decent deposit and who are purchasing a bog standard home will sail through the buying process.
But if your job or property are unconventional – and your credit record less than perfect – it can be a struggle.
David Hollingworth, of mortgage broker London & Country, says: ‘The lender wants to know you will be able to afford to repay the mortgage – and that the property will sell if they need to repossess it.’
Do not despair as there are lenders prepared to take on borrowers – and their dream homes – even if they are not the norm.
GRAND DESIGNS
YOU can obtain a mortgage on most unusual properties – a former windmill, lighthouse, converted public convenience, thatched cottage, church, barn conversion or eco-friendly earth shelter. You should also be able to find a lender to finance your own ‘grand design’ property built from scratch.
The main criteria for lenders is that the property is desirable and will sell easily should you fail to keep up loan repayments.
Those who fancy converting a church, for example, should expect lengthy planning hurdles and a wait for listed
building consent – as well as Church approval for deconsecration.
Converting or self-building homes will require patience, including waiting for cash since most lenders issue loans in stages. Some lend on a plot but others will want to wait until the foundations are down.
TIP ONE: The number of companies prepared to lend against an unusual property is limited. Smaller local lenders are likely to be more enthusiastic because they understand the potential quirks of properties in their area.
Self-builders can find loans from lenders such as Halifax and Earl Shilton Building Society or through self-help organisation Buildstore. For arranging self-build loans it charges £695.
TIP TWO: A list of building plots can be found at buildstore.co.uk. Also check preferred local authority websites for available land. Those who fancy turning a church into a dream home can find disused properties for sale at churchofengland.org, churchinwales.org.uk and churchofscotland.org.uk.
PROBLEMS WITH JOBS
MORTGAGES may currently be cheap but those either on temporary or zero-hour contracts or who have just changed jobs and are working a probationary period, can find it hard to get one.
It is getting easier than in the past. London & Country’s Hollingworth says: ‘The crux is to have evidence of regular income going back at least two years, preferably three if you want more loan choices.’
If employment records are limited then specialist lenders are the best bet. Hollingworth says: ‘Halifax is an option, while niche lenders such as Precise and Kensington Mortgages are more open minded than most.’
But expect to pay a higher price. A two-year fixed rate from Kensington, for example, costs 3.29 per cent for a borrower with a 25 per cent deposit. That compares with deals as low as 1.2 per cent from mainstream borrowers.
TIP ONE: Find as large a deposit as possible. It reduces the risk to the lender – and makes you a more attractive borrower.
TIP TWO: Research suitable lenders before applying, otherwise a series of rejections will leave a ‘footprint’ on your credit record and could further limit your chances of getting a loan.
Going via a mortgage broker that knows the market should increase your chance of success. Accord – part of Yorkshire Building Society – Santander and Nationwide Building Society are among those lenders most helpful to new jobbers.
Jane Burnside, partner at mortgage broker Cochrane Cooke Associates, says: ‘Help your credit score by making sure you are on the electoral roll and have paid off any outstanding debts. Even a £10 default on a payment can cause hiccups in the process.’
She adds: ‘If you haven’t got much of a credit history, think of building one by using a credit card or loan to buy something and then paying it off.’
Check your basic credit ratings for free at experian.co.uk, equifax.co.uk and callcredit.co.uk.
HIGH-RISE FLATS
LENDERS get twitchy over properties in high-rise buildings – especially those above the fifth floor. The exception is in London, where some of the most desirable new properties are in skyscrapers or converted office blocks.
A mortgage may be hard to secure if you are buying in a former council block where the proportion of privately owned properties is 50 per cent or less.
What materials a flat is made of or its design can also influence a lending decision. Many providers are wary of lending on some homes of concrete construction, while others dislike ‘open deck access’ – where entrances to individual properties are all along an exterior corridor.
TIP ONE: Ex-council properties can be good value. So talk to a local surveyor as banks and building societies rely on their advice and they can direct you towards more lenient lenders.
TIP TWO: Ask local estate agents what they know about the split between private and council ownership of particular blocks.
PROPERTY ABOVE SHOPS
PROPERTIES over commercial premises sell relatively easily in boom times and are attractive because they are often conveniently located for public transport and local amenities.
But they can lose their lustre in slower markets. You may buy over a newsagent and then find it converts to a late opening fast-food outlet, making it harder to sell.
Hollingworth says: ‘A bank such as Nat-West will consider property above commercial premises but the decision will come down to a valuer’s view. A fast-food restaurant will raise more concerns than a shop that does not emit cooking smells or is not open long hours.’ TIP ONE: Check with the local council to see if there is a proposed change of use permitted or planned for your chosen property. TIP TWO: Ask local surveyors for their opinion before going to the expense of arranging a survey on a property over a shop.
HOMES ON WATER
WITH the average price of a home topping £200,000, it is tempting for wannabe buyers to look for alternatives that will not break the bank.
Paul Ratcliffe, of specialist lender Shawbrook Bank, says a top-of-the-range narrow boat can be bought for £150,000 – with no stamp duty to pay. He says: ‘Houseboats are very popular with young couples.’ But standard mortgages are not available for houseboats because they are wasting assets that do not sit on a permanent plot of land.
Instead, buyers need a ‘marine mortgage’, essentially an unsecured loan from a specialist provider, such as Shawbrook or Arkle Finance.
TIP ONE: Marine loans are pricier than mortgages. Shawbrook charges 10.4 per cent fixed interest for a loan – minimum £10,000 – lasting between two and ten years with a deposit of at least 25 per cent.
TIP TWO: If the houseboat is going to stay in one place, mooring fees will be charged which can cost thousands of pounds a year. Unlike a boat, it is possible to get a mortgage to pay for a permanent mooring; try Ecology Building Society.
FLOOD RISK
IF THE home you have your heart set on is situated in a flood-prone area, it may be difficult to get a loan.
This is because insurance companies are often reluctant to provide home insurance cover. Since lenders demand homebuyers have such insurance in place, it could scupper your chances of getting a mortgage.
The introduction of Flood Re last April – a scheme designed to make home insurance affordable in areas prone to risk – means more homebuyers should now be able to get cover. Blocks comprising four or more flats and any property built since 2009 are excluded from Flood Re.
The scheme does not automatically mean lenders will be more forgiving although the fact insurance premiums may be cheaper should positively affect a lending decision.
TIP ONE: Check the general flood risk of a property at gov.uk/checkflood-risk.
TIP TWO: For the flooding history of a specific property email its address to the Environment Agency at enquiries@environment-agency.gov.uk.
The report is free but only if it takes less than 18 hours for the agency to compile. If it takes longer, it will charge £25 per hour, including the first 18 hours of work. That means a minimum of £450. The report is sent by email within 20 working days.