Checking a property is mortgageable before you buy
If a property cannot be mortgaged, you can only sell it to a cash buyer. That single fact determines what it is worth.
Most buyers need a mortgage, and a property that cannot be mortgaged can only be sold to the minority who pay cash. That narrows the buyer pool at both purchase and exit, and it is the single largest determinant of a property's value after location.
Some of the reasons a property is unmortgageable are fixable and some are not, and establishing which before you buy is essential — particularly if you are buying at a discount that assumes the property is difficult.
What makes a property hard to mortgage
Each of these is a known lender concern, and some are permanent while others can be resolved.
- Non-standard construction: concrete, steel frame, timber frame and other systems, depending on the lender
- A short lease: commonly under 70 years remaining at the end of the term
- Structural movement or subsidence, particularly without a completed remedy and guarantee
- No working kitchen or bathroom, which some lenders treat as uninhabitable
- Flood risk, where insurance is unavailable or unaffordable
- Cladding or building safety issues, which have made many flats unmortgageable
- A defective or unregistered title, or a title with restrictive covenants
- A property above commercial premises, or in a high-rise block that lenders dislike
How to check before you commit
The most reliable check is to ask lenders directly, or to ask a broker who deals with the property type. A broker's answer is more useful than a general rule, because lender criteria change and vary between institutions.
- Order the title register and check the lease length and any restrictions
- Ask a broker whether the specific construction, lease length or building would be acceptable
- Establish the flood risk from the Environment Agency's published maps
- For a flat, establish whether an EWS1 form or equivalent assessment exists
- Obtain a structural survey where movement is suspected or visible
Why it determines the exit
A property that is unmortgageable at purchase will be unmortgageable at sale unless you fix whatever causes it. That means your exit buyer is a cash buyer, and cash buyers price accordingly.
This is not a reason to avoid such properties. It is a reason to buy them at a price that reflects the restricted exit, and to be clear about whether the restriction is permanent or something you intend to resolve. A short lease you extend and a non-standard construction you cannot change are very different propositions.
Common questions
- How do I know if a property is mortgageable?
- Ask a broker who deals with the specific property type, and check the title register for lease length and restrictions. The main issues are non-standard construction, a short lease, structural movement, flood risk, building safety defects and a defective title. Some are permanent and some can be resolved, which changes the price you should pay.
- Does it matter if a property is unmortgageable?
- It matters a great deal, because it restricts the buyer pool to cash purchasers at both purchase and sale. That reduces the price you can achieve on exit and therefore the price you should pay. If the reason is fixable — a short lease that can be extended — the restriction is temporary and the property may be a genuine bargain.