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Unmortgageable? Disaster or deal?

property investment Mar 30, 2019

When a property is unmortgageable that rules out everyone who hasn’t got a big wad of cash to buy it outright.  In any case, who would buy an unmortgageable property? Doesn’t that mean it’s a lemon?

No, unmortgageable properties can have substantial profits locked inside the front door!

The problem is that mortgage lenders are conservative and keenly focused on only lending money they are 99.99% certain will be repaid.  An unmortgageable property doesn’t tick all their security boxes so they steer well clear.

They don’t take into account that savvy property investors who know what they’re doing can turn an unmortgageable property into a very mortgageable one, by using their expertise the right way.  Lenders see all borrowers as the same – they don’t take experience into account most of the time.

So you’re on the track of unmortgageable properties.  But do you know what you’re looking for? What to grab and what to avoid?

These are just a few of the opportunities that buyers who need a mortgage are unable to consider:

Derelict or semi-derelict property – a great refurb project with a massive uplift in value

Properties with structural defects – definitely unmortgageable, but also fixable.  However, do your due diligence on the cost of fixing before making an offer.  

Properties without a kitchen or bathroom – a simple solution; just fit the required amenities – or get planning permission for an extension to do this.

Properties valued below £50K – in some parts of the UK there are still properties with lower asking prices and there are opportunities for a smart investor.

Flats (or other leasehold properties) with a short leasehold – anything under 70 years and mortgages get much harder to get.  With the correct legal advice and conditional exchange of contracts this can be overcome.

Damp, mould, wet or dry rot – all problems that can be treated, but cost the repairs before committing to purchase.

Properties in areas near mining works, landfill, recent flooding or subsidence – are unmortgageable and for good reason.  These problems frequently have no solution – don’t be tempted!

Properties where planning application for alterations hasn’t been obtained – some people have done conversions either in ignorance or because they thought they could ‘get away with it’.  This can be fixed sometimes, but don’t buy until you’re confident that retrospective planning is likely to be granted.

Vacant commercial properties – to be mortgageable a commercial property must have a tenant or, in the lender’s view, a means of generating an income to service the loan.  If you’re looking at converting a commercial property for residential use that doesn’t mean you can’t buy it and make a profit.

Don’t get carried away – always do your due diligence properly.  Sometimes a deal looks too good to be true, and frequently carrying out rigorous checks reveals it to be so – but there are always deals that are highly profitable too.

 

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