Non-mortgageable property

greetingsfrommike

Hello all!

We are first time buyers (as well as a first time poster - so I hope I'm posting this in the right place!) and have recently come across a very interesting property that is “not currently available for mortgage purposes”. We will have no problem getting a mortgage and have a healthy deposit but clearly cannot make a cash purchase!

After a chat with the agent who stated that the place had been gutted and ALL plumbing (inc. kitchen and bathroom) has been removed – it is for this reason that it is non-mortgageable. This is not a problem for me as I will be refurbishing whichever house I eventually buy.

A little research has led me to “bridging loans” from third parties and “retainers” from the mortgage lender until the property is in a fit state for habitation and thus becomes mortgageable.

Does anyone know if these are still viable routes given the current state of lending or if there are any other routes open to us?

Any thoughts / experiences / advice would be most useful…

Many thanks,

Mike

zone

It will depend on the property. Do you have the capital to invest?

m_13

You could also buy such a property via a renovation mortgage such as those offered by Buildstore. Visit Homebuilding and Renovation's website for more information on these staged mortgage which release funds as you do the work.

Bridging loans can work out very, very expensive as you usually pay interest at a high rate on a daily basis. Retentions are typically small amounts of money retained by the mortgagee and released once work is done to bring that element up to scratch. Typically this is damp or pest work.

A entirely missing kitchen and bathroom would make a property not a home so no residential mortgage. Renovation mortgages allow you to buy ruins without a roof and then gain the money on a staged basis as you complete elements of the renovation.

GDB2222

m_13 wrote: »

A entirely missing kitchen and bathroom would make a property not a home so no residential mortgage.

I'm not a mortgage expert, but I am very unconvinced about that. I would definitely try for an ordinary residential mortgage but expect a retention until the work is completed - for example, you only get the last £10k of the loan when the kitchen and bathroom have been installed.

If the agent says that it won't qualify for a residential mortgage, there could be something else wrong with the property.

greetingsfrommike

Thanks for the info chaps... I think this one's going to take a fair bit of research and rooting around!

m_13

GDB2222 wrote: »

I'm not a mortgage expert, but I am very unconvinced about that. I would definitely try for an ordinary residential mortgage but expect a retention until the work is completed - for example, you only get the last £10k of the loan when the kitchen and bathroom have been installed.

If the agent says that it won't qualify for a residential mortgage, there could be something else wrong with the property.

Lenders are being far more protective than they were about the future value of a property. I've found this on the web:

Traditional lenders, especially on buy-to-let mortgages, will often put 100% retention on a mortgage if the property has no kitchen, no bathroom or is in poor condition.

I can understand that on buy-to-let as until it is habitable there can be no rent income. It's also understandable on residential properties as retentions are usually there to make sure you get something done and if there is no kitchen or bathroom then that's quite a lot of work. I doubt £10k would be the retention even if they'd do it, probably much higher.

greetingsfrommike

Wow! 100% is a very protective retention - m_13 Where did you find the quote - I'd be interested to leaf through that site.

GDB2222

greetingsfrommike wrote: »

Wow! 100% is a very protective retention - m_13 Where did you find the quote - I'd be interested to leaf through that site.

GIYF. http://www.masthaven.co.uk/why_bridging_finance.html It's a website advertising bridging loans, so obviously bound to be unbiased.

mlz1413

If you have a healthy deposit do you also have cash set aside to do the work needed? If you can show that you want say 80% LTV but also have £25,000 (for example) for necessary work to make the house useable then lenders maybe willing to help you.

If you intend to buy using all your cash as a deposit and do the house up as you get paid (ie monthly) then I would seriously re-consider, you cannot live in a house until you have running water and use of heat and light that will not be achievable without a cash sum.

Richard_Webster

If OP could get mortgage with a retention until work was done then possibly he could get access between exchange and completion to do the work and get the retention released before completion.

mrluke

my parents house was a new build , but dad bought it totally gutted as hes a builder.

they only got a 20k mortgage ... but was still allowed it on a 250k property