If a property is unmortgageable, it means lenders are unwilling to offer a mortgage on it because it fails to meet their lending criteria. This usually happens when the property has structural issues, legal complications, or risks that make it unsuitable as security for a loan.
In practical terms, if a property is classed as unmortgageable, buyers often have to pay cash or resolve the issues before a lender will consider offering a mortgage. Here’s what this means in more detail.
What Makes a Property Unmortgageable?
Lenders need confidence that the property they’re lending against holds sufficient value and is safe, secure, and legally sound. If there are problems that affect its condition, resale value, or legal status, the lender may refuse to finance it.
Common reasons a property may be considered unmortgageable include:
- Serious structural damage such as subsidence, damp, or rot.
- No working kitchen or bathroom, which makes the property unfit for immediate habitation.
- Non-standard construction, for example concrete or timber-framed homes, high-rise flats with cladding, or thatched roofs.
- Short lease terms, especially under 70 years, which can make the property harder to resell.
- Legal or ownership issues, such as missing planning permissions, boundary disputes, or unclear title deeds.
- Fire damage or flood risk, where insurers and lenders may not be willing to take the risk.
- Properties above or next to commercial premises, such as takeaways or pubs, which can affect valuation and resale appeal.
A mortgage lender’s survey or valuation report usually identifies these risks during the application process.
What Happens If You’re Buying an Unmortgageable Property?
If you’ve found your dream home or investment property and it’s deemed unmortgageable, you’re not out of options, but the process will be more complicated.
You may have to:
- Buy with cash: Cash buyers have a big advantage in these cases because they’re not dependent on mortgage funding.
- Negotiate the price: Since unmortgageable properties attract fewer buyers, you may be able to agree a lower purchase price.
- Fix the issues: Some buyers choose to make essential repairs or obtain missing documents before reapplying for a mortgage.
- Consider short-term finance: A bridging loan or refurbishment mortgage can help you buy and renovate the property before switching to a standard mortgage later.
It’s important to speak to a mortgage adviser before committing, as they can identify lenders who may consider specialist cases or advise on short-term funding options.
What If Your Property Becomes Unmortgageable After Purchase?
Sometimes, homeowners discover their property has become unmortgageable when they try to remortgage or sell. This can happen if:
- The property has developed new structural problems.
- Lease terms have shortened significantly.
- There are newly discovered legal or compliance issues.
- It’s fallen into disrepair or had unapproved alterations.
In this situation, lenders may decline a remortgage application or a buyer’s mortgage offer might fall through. To resolve it, you may need to:
- Carry out repairs to bring the property back to a mortgageable standard.
- Extend the lease if the term has fallen below lender requirements.
- Provide missing documentation, such as building regulations certificates.
- Use a specialist lender, as some are more flexible with unique or non-standard properties.
A qualified mortgage adviser can help you explore which lenders may consider the property and what evidence or work will make it acceptable again.
Can You Still Get Finance on an Unmortgageable Property?
While mainstream lenders often say no, there are specialist mortgage providers who deal with non-standard or high-risk properties.
These might include:
- Bridging loans: Short-term finance designed for buying properties that need refurbishment before becoming mortgageable.
- Development finance: For investors planning major renovations or conversions.
- Buy-to-let mortgages with conditions: Some lenders may approve a mortgage once specific repairs or certifications are completed.
These products typically have higher interest rates and stricter conditions, but they can provide a pathway to ownership while you bring the property up to standard.
How to Avoid Buying an Unmortgageable Property
If you’re buying a property, there are steps you can take early in the process to avoid nasty surprises later:
- Order a full survey: Don’t rely solely on the lender’s valuation. A RICS Level 2 or Level 3 Home Survey can identify potential red flags.
- Check the lease term: If it’s leasehold, make sure the lease has at least 85 years remaining before committing.
- Ask for documentation: Request planning permissions, building control certificates, and warranties for recent work.
- Consult your solicitor and adviser: They can check for legal or title issues that might stop a lender approving a mortgage.
Being thorough during due diligence can prevent unexpected delays, costs, or lost deposits.
Why a Mortgage Adviser Can Help
Navigating an unmortgageable property situation can be stressful, especially if you’ve already made an offer or your sale depends on mortgage approval. A mortgage adviser can help by:
- Identifying lenders who accept certain property types or conditions.
- Exploring short-term or bridging finance options.
- Advising how to make the property mortgageable again.
- Guiding you through valuations, surveys, and application requirements.
Their experience can make the difference between losing out on a property and finding a viable way forward.
Summary
An unmortgageable property isn’t necessarily a lost cause, but it does require careful handling. It usually means the property doesn’t meet standard lending criteria due to structural, legal, or condition issues. Buyers may need to use cash, fix the problems, or use short-term finance before securing a traditional mortgage.
Before making any decisions, always seek advice from a qualified mortgage adviser. They can assess your options, help you understand the risks, and guide you towards lenders or finance solutions that fit your situation.
