Mortgage declined because of "student area"

JWest

Hi all,

After having our mortgage approved "subject to valuation" and thinking everything was going smoothly, I recently got a call from our broker saying the mortgage company has declined to lend because "the high percentage of student lets in the area affects the re-saleability of the house".

This seems crazy. We live in a city with two universities, and we want to live pretty close to the city centre. If we exclude the really expensive areas and the really run-down areas, there's only student areas left. Are they saying we can't live in any of them? Our broker said that most high street lenders would have the same reaction. If that's the case, how does anyone (except landlords) ever buy a property in these places?

Besides all that, we have a hefty deposit saved up, so we only need to borrow 25% of the property value. Surely the lender can't be suggesting that the house isn't worth £50,000? Our mortgage broker's reply to that was "it doesn't work that way". Doesn't it? Everything I've read seems to suggest it would, but as first-time buyers we're finding the whole process very confusing.

Has anyone experienced anything similar to this? Can anyone offer any advice on what our next step should be?

vuvuzela

Which city / postcode is this ? Offhand I can think of several, particularly in the North - Leeds, Manchester, Liverpool spring immediately to mind.

stator

I'd phone around to a few mortgage companies direct. The person you speak to will phone through to the underwriters and get a good idea whether it should be a problem or not.

gazfocus

My initial thought was if the mortgage broker is now saying "most high street lenders would have the same reaction" why the hell did they submit the application with a high street lender without checking with them first?

I would be looking for another mortgage adviser personally.

Cisco001

I would expect the other way round...
Students area will attract BTL landlord...

JWest

vuvuzela wrote: »

Which city / postcode is this ? Offhand I can think of several, particularly in the North - Leeds, Manchester, Liverpool spring immediately to mind.

Nottingham, NG7 postcode. It is a pretty student-heavy area in general, but not so much in the precise vicinity of the house in question. I can only imagine the "valuation" consisted of nothing more than looking up the general area on a database.

JWest

stator wrote: »

I'd phone around to a few mortgage companies direct. The person you speak to will phone through to the underwriters and get a good idea whether it should be a problem or not.

Is it that easy? I thought I had to apply and go as far as the valuation stage before getting an indication like this? If it's that easy, why couldn't my broker have checked this out for me before things got this far? Anyway, thanks for the tip, I'll give it a shot.

JWest

gazfocus wrote: »

My initial thought was if the mortgage broker is now saying "most high street lenders would have the same reaction" why the hell did they submit the application with a high street lender without checking with them first?

I would be looking for another mortgage adviser personally.

I assumed it wasn't possible for them to check before the valuation stage, and they're only saying now that other providers would do the same thing because they'll be going through a roughly similar valuation process.

I've been fairly happy with the broker so far (having gone with MSE's recommendation), but then it's very hard for me to be sure they're doing a good job, since I know nothing about the process beyond what I can research on the web.

JWest

Cisco001 wrote: »

I would expect the other way round...
Students area will attract BTL landlord...

Not any more. There is some relatively recent law/regulation (I don't know the exact details) that makes it difficult to repurpose a house into being let "under multiple occupation" (i.e. to students rather than a family) unless it's being let that way already.

I can see that this might somewhat reduce the price of houses in these type of areas, but at the end of the day no more than 25% or so of the houses in the area are student lets. Have the other 75% of the houses in these areas somehow become worthless overnight?

gazfocus

JWest wrote: »

I assumed it wasn't possible for them to check before the valuation stage, and they're only saying now that other providers would do the same thing because they'll be going through a roughly similar valuation process.

I've been fairly happy with the broker so far (having gone with MSE's recommendation), but then it's very hard for me to be sure they're doing a good job, since I know nothing about the process beyond what I can research on the web.

The whole purpose of using a broker is that they have good relationships with the lenders.

When I bought my first house, I had a couple of defaults on my credit file and some late payments. My mortgage adviser sent my credit file to some lenders before even trying to get a decision in principle. In the end, they got me a mortgage with Leeds Building Society because they had come back and said, they would approve me.

A good mortgage broker is worth their weight in gold, trust me.

stator

JWest wrote: »

Is it that easy? I thought I had to apply and go as far as the valuation stage before getting an indication like this? If it's that easy, why couldn't my broker have checked this out for me before things got this far? Anyway, thanks for the tip, I'll give it a shot.

There are no guarantees but you might as well try. If they say no you'll know not to bother wasting your time.
I phoned up a few mortgage companies to ask if they would accept Repossessed properties. They always put me on hold and phoned through to the underwriters and then came back to me with the answer.

The other possibilitiy is that it wasn't the mortgage lender who had the problem but that it was just the mortgage valuation surveyor who had a particular objection to the area and the mortgage lender was just following their advice. In which case another surveyor would likely come up with a different answer.