Difficult Mortgages | Properties That Lenders Don’t Like To Grant Mortgages On

Introduction

In this episode of Let’s Talk Money and Mortgages, Gemma and Gifty discuss different types of properties that lenders may be reluctant to provide mortgages for. Below is a clear breakdown in a Q&A structure.

Ex-Local Authority Housing

Q: Why are lenders worried about ex-local authority properties?
Some were built with materials considered below standard.
Lenders think the property value may decrease over time.
Often surrounded by rented council properties, which can affect desirability.

Q: Can I still get a mortgage on one?
Yes, but your lender options will be more limited.
Rates might be higher since the cheapest lenders may not be available.
Always check with an adviser before making an offer.

High-Rise Flats

Q: What’s the issue with flats on very high floors (e.g., 19th floor)?
Concerns over fire safety (e.g., after Grenfell Tower).
Structural risks increase with height.
Lenders usually accept up to 6–8 floors comfortably; beyond that, options are limited.
Lifts are essential—stair-only access is a problem.

Concrete-Built Properties

Q: Why is concrete construction a problem?
Not all concrete mixes are of good quality.
Lenders prefer “standard” builds (brick and tile).
Concrete homes often require specialist lenders, reducing options.

Properties with Commercial Areas

Q: Why don’t lenders like flats above shops or commercial units?
Fire risks from businesses such as bakeries, restaurants, or pubs.
Smells, noise, and alcohol sales are red flags.
Lenders are more lenient with offices below, but it’s still not straightforward.

Properties with Annexes or Two Kitchens

Q: Why are annexes and multiple kitchens an issue?
Lenders assume the annex will be rented out separately.
Residential mortgages are meant for one household, not commercial use.
Only a few high-street lenders consider these properties, and often at higher rates.

Multi-Unit Blocks

Q: What are multi-unit blocks and why are they difficult?
Multiple small units under one freehold, rather than leasehold.
Lenders dislike this setup, especially if units are under 30 square metres.
Options are limited; always check before buying.

Live-and-Work Units

Q: Why are live/work spaces a concern?
Residential mortgages are for living, not running a business.
Mixed-use properties blur the line, which lenders dislike.
Only a few lenders may accept them.

Studio Flats

Q: Why are studio flats sometimes a problem?
Many lenders require a minimum of 30 square metres.
Some will accept as little as 25 sqm, but this is rare.
Fine for renting out, but resale or remortgage options can be restricted.

New Builds or Renovated Properties

Q: Why are lenders cautious about new builds?
Like new cars, they lose value quickly once sold.
Buyers may prefer a brand-new neighbouring property over a recently lived-in one.
Lenders often require bigger deposits (e.g., 15% instead of 10%).

Freehold Flats

Q: Why are freehold flats an issue (in England)?
No management company to handle insurance and maintenance.
Responsibility falls on owners, making it complicated.
Much less of a problem in Scotland where freehold is the norm.

Flying Freehold

Q: What is a flying freehold?
When part of a property extends over another (e.g., above someone else’s garage).
Lenders may avoid these due to shared structures and complications.
Always check before purchase and consider resale implications.

Inhabitable Properties

Q: Why won’t lenders accept uninhabitable properties?
Properties must have a bathroom and kitchen to qualify.
Even if you plan to install them, most lenders won’t consider it.
Specialist lenders may exist, but options are very limited.

Eco Homes

Q: Are eco homes difficult to mortgage?
Some unusual eco-builds may not fit lender criteria.
Lenders prefer standard brick/tile builds.
However, the market is adapting with “green mortgages” becoming more common.

Short Leases

Q: Why is a short lease a problem?
Lenders usually want at least 80 years remaining.
Below this, options shrink, and deposits may need to be larger.
Lease extensions are possible but costly.
Some buyers negotiate for the seller to extend the lease before purchase.

Final Notes

Always seek advice before making an offer on unusual property types.
Even if a lender accepts it, future resale or remortgage could be difficult.
A mortgage is secured against your home. It may be repossessed if you do not keep up repayments.