Buying and selling property is a challenging task at the best of times. Property chains can cause long delays, and prices can be high, but by far one of the most impactful obstacles is when your property is unmortgageable. It can put a swift end to an attempt at obtaining a loan or purchasing a new property, and why your property is unmortgageable isn’t always apparent. But, it doesn’t necessarily mean an unhappy ending for you.
In this article, we will discuss what factors make a property unmortgageable, provide a few practical examples, and detail what you can do to fix these issues. Let’s get started.
What makes a property unmortgageable?
Finding out that your property is unmortgageable can be an unpleasant surprise, to say the least. It means that your property cannot be used to secure a loan, whether it be a mortgage from the bank, or a loan from a private lender. Naturally, this can put off any would-be buyer, and can mark the end of sale negotiations quite abruptly.
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While certainly a major problem, all is not lost. A property can be deemed unmortgageable for various reasons, with many having fairly straightforward fixes. That said, don’t wait until the last moment to find out if a property is unmortgageable, regardless of whether you’re buying or selling. Make sure you have the property evaluated early, and you might be made aware of the warning signs with more than enough time to act. Before you consider buying or selling a property, it can pay to be aware of the warning signs that a property is unmortgageable. Here are some of the most common.
Poor Location
One of the clearest warning signs that a property is unmortgageable is a poor location. Namely, a property that is situated nearby or in the same building as a commercial property is seen as a risk by lenders. This is because lenders are concerned that the commercial property can change hands and become disruptive for nearby residential dwellings, even if it was unobtrusive beforehand. If this happens, residential properties will see their value drop, as few buyers would be willing to put up with living right next to a pub, betting shop, or 24-hour retail shop.
If your property is situated near a commercial property, there isn’t a whole lot that you can do. It’s stuck where it is, and you’ll simply have to put up with disinterest from most buyers and lenders. This isn’t to say that you won’t find a buyer, however. With enough searching, you may well find someone that likes the convenience of the nearby store or establishment and would be happy to make a purchase. Equally, there are lenders that will finance the purchase despite the risk, though likely at higher rates than for less risky loans.
Unusual or hazardous construction materials
Though admittedly less common nowadays, but certainly still worth keeping in mind, some properties are constructed with outdated, hazardous, or unconventional materials. This can include houses that have asbestos in the garage, or properties made out of any non-standard construction material, such as steel-framed houses.
If your property is partially or fully built using a non-standard construction material, you will likely have trouble finding a lender willing to finance a purchase. This is largely due to perceived risk, with particular concern for the property’s structural stability and the occupants’ health. Non-standard construction materials are often viewed as negatively affecting either or both of these two concerns, causing many buyers and lenders to steer clear.
Having a property with some non-standard construction materials isn’t as much of a problem as the previous warning sign of an unmortgageable property. Depending on how much of the material has been used, it can be as simple or as difficult as removing the offender. Asbestos, for example, can typically be removed easily once the professionals have been called in. They will scour your property of the substance, removing an obstacle to mortgaging the property as well. However, if your property is made mostly or entirely out of a non-standard construction material, you will likely have a much harder time dealing with it. In this case, you may find sale negotiations slow down significantly, or stop altogether.
Absence of vital rooms
In order for a dwelling to be classified as such, it must have a few key features. While there are plenty of features that a house must have to make it appealing, there are two that are absolutely vital. A kitchen must be properly installed for meal preparation, and a bathroom for sanitation. If a property does not have both of these rooms and is meant to be a dwelling, the likelihood of a lender financing its purchase is essentially nil. This is also the case for properties with such facilities, but they are in a state of significant disrepair.
If your property does not have both of these facilities in good working order, you’ll need to spend some money to install or repair them. Once you have done so, your property will not be considered unmortgageable, and you’ll have a much easier time finding a buyer.
Natural issues
Another serious warning sign that a property is unmortgageable is that nature has taken issue with it. This could be in the form of a vermin infestation, the incursion of invasive plant life, such as Japanese Knotweed, or it stands in the way of natural disasters, such as a flood. Unsurprisingly, lenders view such factors as incredibly risky, and not many are willing to lend to facilitate this kind of purchase.
However, many of these natural issues can be solved, though it will cost a fair chunk of money. Exterminators can be called to purge the property of an infestation, whether it be creature or plant, and damage can be repaired. What isn’t so easy to deal with is location. If your property is situated in a high-risk area for natural disasters, such as on a floodplain or near an incline at risk of a landslide, then there isn’t much you can do. Quite like the first warning sign, this doesn’t mean you can’t sell the property, but it will be more of a challenge. With enough patience, you may find a buyer and a lender willing to take on the risk.
Wrapping up
Before you start searching for buyers, or consider purchasing a property yourself, it pays to look for warning signs that the property may be unmortgageable. Doing so early can help you significantly in the long run – you won’t be unpleasantly surprised partway through a deal, and you’ll have ample time to deal with the problems. As a buyer, you won’t accidentally purchase a property rife with hidden issues, saving yourself a great deal of money and effort. By doing your research, you can make the notoriously difficult process of buying and selling property that much easier.