How can you finance the purchase of an uninhabitable property?

How can you finance the purchase of an uninhabitable property?

You might have seen an incredible bargain property that you want to buy or you may be a first-time buyer looking for a cheap fixer-upper so that you can get on the property ladder. But when it comes to financing your purchase, you may hit a stumbling block. If the property is considered to be uninhabitable, lenders will be reluctant to offer you a mortgage.

What’s considered to be an uninhabitable property?

Lenders vary with their specifications for a property being uninhabitable but, generally, it isn’t suitable to be lived in if:

  • It’s not wind and watertight, so there’s no protection against bad weather
  • It has a non-standard roof, such as a thatched roof, or the roof is in a bad state of repair
  • There’s significant damp or mould in the property
  • There’s no working kitchen
  • It doesn’t have a functional bathroom, including an indoor toilet

Lenders also usually require the property to:

  • Have electricity and central heating
  • Have basic security, such as locks and solid doors
  • Be free of asbestos
  • Be free of Japanese knotweed
  • Have a safe staircase
  • Have no infestation issues

Why can’t you secure a mortgage for an uninhabitable property?

Even if the work required to bring the property to a habitable condition is straightforward or you disagree with the lender and believe the property to be liveable, it’s highly unlikely you’ll be granted a mortgage. This is because it involves too much risk for the lender. Usually, eligibility for a mortgage will only be considered once the necessary work has been carried out on the property.

Ways to finance the purchase of an uninhabitable property

If a mortgage is out of the question, how can you finance the purchase of an uninhabitable property? There are a couple of options to consider.

A bridging loan

This short-term loan is typically taken out for up to 12 months. It bridges the gap so that you can buy the uninhabitable property and carry out the necessary work before either selling the property or arranging your long-term finance, such as a mortgage. Bridging loans provide a lot of flexibility in their use and are fast to arrange, giving you quick access to the funds you need. This means that bridging finance is ideal for buying a bargain property at auction as there’s a short completion deadline to meet.

A second charge mortgage

Another option is to use a second charge mortgage to buy an uninhabitable property. This allows you to use the equity that you’ve built up in your home or another property. It works by taking out a second mortgage in addition to your original one via a different lender. It’s secured against your property with the equity being used as collateral. You can then use the funds as a cash buyer to purchase the uninhabitable property. Once the work has been done to make the property habitable, you can then remortgage it.

We can arrange your unmortgageable property finance

Uninhabitable properties are great investment opportunities provided that you can secure the right finance. Our mortgage brokers work closely with specialist lenders offering unmortgageable property finance. They will discuss your situation to determine the best type of financing option for you. Your dedicated broker will then tailor your application before submitting it to the most suitable lender. To get the ball rolling, just give us a call on 01322 907 000 so that you can proceed with your purchase of an uninhabitable property.