Mortgage refused on flat not house

chipsaredown

Hi everyone: we're first time buyers with 15% cash deposit and an approved AIP with Yorkshire Building Society on fixed 5 yr @ 5.69%.

Just went to complete the final application process but was refused at final submission on grounds that they only provide mortgages on flats to those with deposits of 25% or more: however this was not anywhere on their website; Has anyone else had the same problem (or any advice) as we don't want to make a new application and go through all of the credit searches / scoring to be told the same thing again at the end of the process.

Many thanks for help / guidance anyone can provide.

Gambit

Strange you mention that as we applied for an Abbey/Santander mortgage last week and despite having 90LTV products, we were told that the maximum they would lend us (on the flat we found) would be 85%. So this makes me think that some lenders are being wary of lending on flats.

chipsaredown

Thanks for the response Gambit; Do you know why there is a bias against flats - and why wouldn't this have been mentioned anywhere else on the website? Most frustrating!

Have you had any luck with your mortgage since?

Gambit

No idea tbh, it's only something that was mentioned by my mortgage advisor when trying to work out why Abbey/Santander said that the credit check came back fine but would still not lend more than 85%. The only reason I can guess they dont put it on the website is that they dont want to put people off and they know once you have applied you are invested in some ways as you might not want more credit checks...etc...

Well we applied on Wednesday and was told last Wednesday night that they would only lend us up to 85% and not the 88% we asked for. Like you we were worried about going to another lender, go through the whole thing again and just be told the same thing. Also we know that our vendor wants to sell quick so we were worried about creating delays with having to go with another lender. Luckily some family offered to lend us the 3% we needed so the following day we re-applied and on the Friday we were told it had been approved. This afternoon I was told that the valuation was booked for Wed afternoon so it seems that all is going well now :j

I would say that 25% is quite a high deposit to demand especially when you already have 15% which as a first time buyer I think is good to have. As doubt many have it - I know we didnt without help!!

Good luck with your mortgage application and I hope you are able to sort this. It's so unfair when these decisions are made without being given a reason!! :mad:

laurel7172

Well, I don't know about where you are, but my city has seen a lot of flats built in the last few years. They always seemed hideously overpriced to me (surely only in a leave-of-one's-senses market would one pay the same for a one bed flat in a grotty area as for a two bed terrace in a respectable one?). A friend who lives in Cardiff refers to the new blocks as "future slums".

I suspect there have been many fingers burned on new build flats-which would account for the increase in the risk profile applied by the mortgage companies.

Dan_1976

To many flats built at prices that were over inflated and they dropped. Lenders are now protecting against any future drops as flats are normally hit harder than houses.

New build flats have been hit even harder.

The lender can chose who and what to lend on, but I understand your frustration.

Gambit

Ah ok, that kinda makes sense I guess.

To answer your question laurel7172, I'm buying in Southfields, South London. Maybe that's why Abbey/Santander thought that 15% would be acceptable as I doubt flats in London would ever lose too much in value... touch wood!

chipsaredown

Thanks all for the feedback; some further information; the flat is a victorian conversion in Lewisham, South London - so not a new build - Any other theories gratefully received?

luckyfool

Yorkshire Building Society will just not lend over 75% on any flats, anywhere, irrespective of age. If you want 85% you either need to buy a house or use a different lender. YBS are unusual in restricting ltv's on established flats, normally with other lenders it is only "new build" (which depending on the lender can include any flat built/converted/first occupied in the last 4 years or even longer).

herbiesjp

Agreed with Luckyfool.

Most lenders tend to restrict LTV on newbuild flats/houses - some lenders will class newly renovated as newbuild as well. Again as pointed out above, different lenders have different ways of classifying newbuilds so you would need to triple check criteria before applying.

But you should be able to find other lenders/options happy at 85% on a flat, as that seems to be a large proportion of my business at present.

nico1977

I agree with Herbie there are many more lenders out there who will lend on converted flats so you should have other options open to you depending on your circumstances etc.