Tiny Studio - Mortgage Attainable?

sdj123

First time buyer here. I've been looking at small studio apartments. Most seemed to be marked "Cash Only". When I call the agent to enquire as to why, the most frequent response I've been given is that lenders don't give mortgages for properties under 30sqm.

However to get a desired property Central London I can't really afford to buy something bigger.

After a quick search I discovered this on the Guardian website:

Mortgages: size matters
Around 50% of lenders in the market, including Accord, Skipton and Virgin Money, will not lend on studios. “Of those lenders that do consider them, nearly all specify a minimum of 30 sq m,” says Ray Boulger from mortgage brokers John Charcol.

...

The lenders that do not impose size restrictions are Santander, Nationwide, Woolwich and the Lloyds Banking Group brands (Halifax, BM Solutions, Lloyds Bank and Bank of Scotland). If the studio is more than 30 sq m, NatWest and Leeds building society may also lend on it, and brokers Anderson Harris says to consider applying to Clydesdale, Kent Reliance and Metro Bank, too.

When I call up the lenders above, inform them of the size and state I have a 30% deposit, they often tell me they can't see any issues. However those that have experience with property tell me the issues comes normally at the point where the underwriter looks at the paperwork.

While I want the best deal, I want to go ahead only with a lender where the deal won't stop short down the road. Does anyone have any advice?

Mortgage_Mark_2

I suspect those marked 'cash only' have other issues - freehold? Length of lease? Issues on previous surveys?

oli_ro

I think you should consider using a broker who has practical experience of placing such loans.

2 observations though:
- make sure you understand that when it comes to sell, due to the same reasons you were told by EA, the market is not very liquid for studios.
- be careful with the price to make sure you can pass the valuation, from talking to friends who were in similar situations, surveyors are not big fans of over inflated studio prices and will also consider constraints in potential resale.

I understand why people buy studio in nice locations, but some of prices seem out of this world, e.g. 26sqm -> 375-400k in Central London !

amnblog

Don't make decisions based on what you read on The Guardian website.


Unlike me, they can post what they want with no regulatory come back.


As Oli says - get some advice from someone who knows what they are doing.

sdj123

Thanks for all the quick replies!

oli_ro wrote: »

I think you should consider using a broker who has practical experience of placing such loans.

How can I asses if a broker has experience of placing such loans? I've called a few up and they have said there is no problem...but I want to be sure.

It would be great if I could find one that specialises in such types of loans.

oli_ro

There is no such thing as broker specialising in studios, but brokers with experience/connections that know the different constraints lenders have for studios and can(and have) navigated in these water before.
Also, these constraints need to be combined with your personal circumstances.

Get a good broker from colleagues/friends/family recommendation and run your case by them. They should also mention lender names at this stage.