What makes a property unmortgage-able?

They’ve saved the deposit, got their mortgage agreement in principle and made an offer that you accepted without hesitation. Everything is moving in the right direction when, suddenly, your sale is sabotaged as your buyers are refused their mortgage.

Many vendors don’t realise that a mortgage agreement in principle isn’t a cast iron guarantee that a lender will provide the funds. So much rides on the small print in the paperwork and the results of a surveyor’s report – two aspects that are examined late on in the conveyancing stage when you may start to feel comfortable about sales success.

If one buyer has been refused a mortgage when trying to buy your property, there is a high chance others will experience the same rejection. We call unmortgage-able homes ‘problem properties’ and they are unattractive to most buyers who need finance.

Open Property Group has rescued many sales where the buyer was refused a mortgage and over the years, we have heard a variety of reasons why the lender has backed out. Here’s why your property may not past the mortgage test:-

• A short lease: if your lease is 80 years or less, be prepared for a potential shock. Mortgage lenders are increasingly turning their backs on homes with short leases, especially those with less than 70 years.
• Subsidence: if the survey results are negative and show signs of subsidence, a mortgage lender can quickly withdraw their offer. Sometimes this is linked to insurance – those buying a property with subsidence may find it difficult to get buildings insurance and without this policy, a lender won’t loan on the property.
• Japanese knotweed: this plant strikes fear into sellers if it’s uncovered during a survey. Although some lenders are taking a more relaxed approach to lending on properties with this invasive fauna, others will still point-blank refuse a mortgage if there’s evidence of Japanese knotweed in the garden or within 7 metres of the property’s boundary.
• Uninhabitable condition: if the property you are selling is off-grid or thoroughly unmodernised, any buyer will struggle to obtain a mortgage. Usually the lender will want the property to have running water and be connected to an electricity supply to meet its lending criteria. A mortgage can also be declined if there’s no kitchen, which also classes the property as ‘uninhabitable’ in the eyes of the lender.
• Non-standard construction: mortgage lenders like traditional bricks and mortar with a slate tiled roof. If the property you are selling is built using concrete, is timber framed, has a thatched roof, is classed as a prefab or features cladding on the outside, some lenders may turn borrowers away on this basis.
• Two of something: there are some more unusual red flags in the mortgage market that many sellers will be unaware of. For example, if you have two kitchens, two front doors or two buildings with bedrooms on one plot of land, lenders will be very suspicious. They may refuse a mortgage on the grounds a buyer could rent the property out as a buy-to-let, which would break the conditions of a residential mortgage agreement.

Don’t forget, the estate agent industry is in the process of having to disclose more information about a property at the time of launching the home to the open market. In the near future, issues such as subsidence, no running water and Japanese knotweed will have to be mentioned upfront in the details.

If your sale has already been aborted due to a refused mortgage, or you’re worried your property may suffer from one of the above, talk to Open Property Group. We are professional cash buyers and don’t need a mortgage, so we’re not put off by your property’s condition or construction. Get your free cash offer here or get in touch for personalised advice.