What Makes A Property Unmortgageable?

White, Pink, Yellow, and Teal Painted Houses

When you are selling a property, the best scenario is for someone to come along, fall in love with it, get a mortgage and pay you the money for it. But, for this to happen, the buyer has to have a valuation of the property done because their lender will require it. Sometimes, that valuation comes back to their bank and raises some major concerns. Some of these concerns turn into a denial of the mortgage being approved and thus will make your property to be unmortgageable. This can happen to any type of property you may be selling, including houses and flats. Words you may hear used interchangeably with unmortgageable include non-mortgageable, unfinanceable or unlendable property. But they all mean the same thing, the mortgage is denied. Why? The lending company gets news that your property is at high risk. High risk for what, you may ask? High risk of not being able to be resold at a later date for enough money for the buyer to recover the cost of the mortgage and then being unable to pay the remainder of the principal off. This hurts both the buyer and the lending bank.

You may already know that there are issues with the property you are selling, after all, every property has its downfalls, but you may not be aware that the property you are selling is unmortgageable until the valuation is done and a Royal Institute of Chartered Surveyors, RICS, the report has been written and submitted to the bank on behalf of the person wanting to buy your property. Their report is written with green, yellow and red ratings. Green means good and things are in working order, yellow means it is something to keep an eye on because things may be at risk of failing and red means there is a critical issue that must be fixed straight away, so if something is listed in red, about your property, that red could result in the denial of a mortgage for your buyer. If your home is flagged, by a lender, as unmortgageable, then it is going to be hard to gain a sale from anyone who is seeking a mortgage to purchase it. Thus, you will need to be willing and able to take the steps necessary to fix and mitigate the critical issues that must be addressed.

So, What Specifically, Would A Surveyor Mark In Red On Their Report?

Multiple things could create those red marks by the surveyor. As mentioned previously, red means that there is something that needs to be addressed straight away due to potential health or potential safety concerns for the person who wants to purchase your home.

Kitchens are key to the home working properly for the person or persons who are living there. There must be a kitchen for food prep to be able to happen. Eating is crucial to living. If your property does not have a kitchen or is missing important components of a kitchen, the lender will see red on their report in the area of the kitchen. All concerns will be noted. Thus, if you remodel your kitchen so that it is in full working order, then your property becomes mortgageable.

Bathrooms are also a vital part of a home. There must be a bathroom for hygiene purposes. Bathrooms are a requirement for the basic needs of life. Just like if your home has no kitchen, if there is no bathroom in your home or if it is missing properly working things like a toilet or a sink, the red will be seen by the bank and that dreaded term unmortgageable comes into play. Adding a bathroom, fixing the broken components or adding missing pieces will make your home lendable.

Non-habitable and red markings also go hand in hand in the surveyor’s reports to the lending agency. If the surveyor reports to the lender that your home is non-habitable, this may mean that your roof is missing or maybe it needs major repairs. It may mean that your home is missing other vital parts such as floorboards or stairs. Non-habitable could also be referring to other damage that makes the home non-livable. The fix, to make it habitable and mortgageable is a rehab. Rehab your home in such a way that the roof is in great shape and protects the entire property, replace and fix floorboards, add the missing stairs and fix any other issues that have been noted in the surveyor’s report.

Another issue that surveyors often catch and write in red would be a structural movement that has happened to the property either due to coal mining, the weak ground under the home, tree roots growing up under the home or maybe some other type of issue. The surveyors can identify that this issue exists if they see cracks in the brickwork. They may not be able to quickly identify why the structural movement has happened, but it is worth marking in red for the lenders report. You may have to do the work to find out the cause. Once you determine if the structural movement is due to tree roots, weak ground, coal mining, or something else, it will then become your responsibility to hire the right professional, most often a structural engineer, to do what they can to mitigate the issue so that you can have a mortgageable home again and it can sell with a mortgage. Of course, if you notice cracks in your brickwork before you even put your home up for sale, it would greatly benefit you to find the cause and have it fixed so that you do not have to see those red marks in a report and risk losing a buyer.

If the surveyor finds rot, the report is red. Rot is not good for a home. There are two types of rot. There is dry rot and there is wet rot. Dry rot smells like mushrooms because it is a fungus like mushrooms. It is white or grey in colour initially, but as it spreads the colour turns to red or orange. If you have dry rot, the problem is dampness inside the timber, which then weakens the building material that it is sitting up next to as it spreads to that surface. Wet rot is dark brown or black and it is dampness on the outside of the timber. Either way, if the rot has spread, the structure can become weak. To fix this issue and make your house mortgageable, you need to get rid of the moisture. If you are unable to get rid of the moisture, you will need to have the affected timbers replaced.

Wood-boring insects are a red flag to surveyors; thus the red markings appear if these are found. This could be found in your home, especially if your home has a lot of timber. A specialist will need to be called in to take care of this issue if you want to ensure that your home can be mortgaged by a buyer.

Rising damp or penetrating damp can severely damage your home, so obviously, if either one is a problem, it will have to be fixed by fixing drainpipes and cracked gutters and installing fans and vents that get rid of the moisture for a lender to be willing to approve a mortgage be taken out on your home. Surveyors look at everything including the insulation in the home.

If your home was built in the 1900s, be aware that they may find asbestos, which has since been banned in the construction of homes and buildings. Asbestos, within the walls, does not pose any health risk, which is why we often do not even know it is there. But, if your buyer were to do a renovation or something happened to one of the walls and the asbestos were to become exposed, health risks would ensue. This is why asbestos would deem your home unmortgageable until you have had it removed by specialists. It is a pricey mitigation, but one that must be done for the sake of everyone’s health.

It may be surprising, but red marks can be seen in the report for certain kinds of plants. Yes, plants can make your house unmortgageable. Japanese Knotweed is a very invasive plant and is one that surveyors are on the lookout for. The roots of this plant can put the structure at risk because it can be found in the concrete, in the drains and even in cavity walls of the home. The solution to this plant is having a qualified removal specialist come to assess the plant to be sure that it is Japanese Knotweed you are dealing with and not another plant that can be confused with Japanese Knotweed such as Russian Vine, Himalayan Honeysuckle or Red Dragon, all of which are not harmful. If the surveyor was right, confirmed by the specialist, then have them use their special skills to remove it. It is important to note here, that once their special skills have been applied, it can take a few years for the problem to completely cease. So, be sure to get the necessary documentation from the specialist that they have indeed taken care of the issue so that you can give that documentation to the lender for your buyer to be approved for the mortgage. Other plants to be on the lookout for, that the surveyor will mark in the report are giant hogweed, Ivy and Himalayan Balsam. Again, if these show up on the report and they are the reason for your house being unmortgageable, call in that specialist and have them get rid of these plants. Also, marked in the report would be big trees that are too close to the home and pose a risk of roots getting up under the home. In this case, you will need to call in someone to remove the trees so that your buyer can proceed with getting a mortgage.

Surveyors do their research on top of doing the visual inspection. If your home is prone to flooding or is on or near coal mining or historic landfill resources, surveyors will put that red in the file. While there is not much you can personally do to mitigate these issues, your buyer can overcome these issues by searching out a different lender who will lend the money if they pay more interest or if they take out an insurance policy on the home that offers a higher premium.

In doing that research, if your lease is sitting at less than eighty years, the red markings appear. This is something that you can avoid before you put your home on the market. You can extend your lease. But you should know that extending your lease takes time. It could take several months for this process or longer if they don’t respond. If there is no response, then a Section 42 notice should be served. The Section 42 notice means you must be the owner for two years before you can transfer the ownership. So, be sure that you do your research on this before you even put your house for sale or be prepared to wait it out.

Likewise, if there is a defective lease, then this can also lead to mortgage lenders deeming the property unmortgageable. Defective leases can include deed of covenant non-compliance by prior leaseholders where legal issues have arisen; concerning activities including, but not limited to excessive noise or crime; the information regarding freehold ownership lacking clarity; missing information or unclear information about the development that the property is located in; restrictions on standard letting; and poor repair and/or maintenance provisions included in the leasing document. There are a couple of solutions for these issues resulting in the property being deemed as unmortgageable. First, obtaining an indemnity insurance policy can change the lender’s mind, depending on how serious the issue is. Second, a deed of variation or recertification might be needed. Be aware, though, that these take quite a bit of time to create and serve. In the time it takes, the buyer could back out.

Lenders want to know, upfront, what the ground rent will be when they are considering offering a loan to a home buyer. Unfortunately, when the ground rent scandal came about, back in 2017, ground rents significantly increased. This happened when new build development companies decided to apply onerous clauses in all of their contracts. Thus, lenders are wary of approving a mortgage if they do not know, with clarity, the amount of the ground rent. So, if your ground rent came about before the Leasehold Reform Act, the red flags and thus the red markings will cause the mortgage to be denied. Unfortunately, there is not much you can do about this issue other than to go the cash-buyer route.

Incorrect land registry titles happen the most with homes or residential buildings that were split into flats during a previous renovation. The problem is not that they were split into flats, but that it was done incorrectly. The flats are all separate units, each having an entrance, bedrooms, bathrooms, etc. The problem comes if flats may not have been split into the correct sizes, but they are all on one title. Because of sizing issues, the surveyor makes their marks and thus lenders may mark this property as unmortgageable. The solution to this is to go and get a certificate of lawfulness for the mortgage lender. To meet the space standards you might have to have a reconfiguration of the property done.

This issue of electrical and/or gas-related faults could fall under the non-habitable property category, but is important enough and sometimes occurs without some of the other issues facing non-habitable properties, that it deserves its topic and will receive those dreaded red marks that make the lender halt the mortgage process. This problem could pose a danger to the lives of those living on the property. For electrical faults, you will need to contact an electrician to fix the problem or problems. However, before doing so, make sure that you check in with the National Inspection Council for Electrical Installation Contracting (NICEIC) or the National Association of Professional Inspectors and Testers (NAPIT). If you need to mitigate gas issues you will need to hire a contractor to help you mitigate the problem. Before you hire the contractor, though, be sure to go to the Gas Safe Register and check their accreditation.

Possibly not on the surveyors report but something that lenders pay attention to when deciding if a property is mortgageable is the price They don’t like to mortgage properties that are priced at or below fifty thousand pounds. The reason is that they typically have minimum lending requirements set in place. They have those requirements due to perceived risks in low-valued properties. If the property is being purchased as part of a portfolio, though, the lender will be more willing to advance the mortgage.

When properties overlap, you have what is referred to as flying freeholds or creeping freeholds. This issue is often not known until the conveyancing process takes place. It is an incredibly complex situation when it arises. The solution involves cooperative neighbours as well as legal processes that will cost some money.

Similar to flying or creeping freeholds, boundary issues can arise. When this is the issue at hand, you often have a shared pathway with your neighbour. This can lead to the lender deciding the property is unmortgageable. Negative easements would be something that may keep you, as the property owner from doing a repair or an improvement on your property, which is most common when a residential property is near a commercial or an industrial site. In either of these scenarios, your solicitor can work with the neighbour or neighbouring business to come to a cost for reparations of this issue that both parties can agree to.

The mortgage lender checks and verifies several things before determining if a property is mortgageable or unmortgageable, this includes verifying the ownership of the property. If you do not have the title deeds, it is possible for HM Land Registry to help, they have steps you can follow. This could be the case if you have inherited the house you are selling. Your name may not have been added to the Title Register yet. If you are not the owner, but you must sell the property for your elderly mother or father, you must present the PoA, Power of Attorney to the lender. The lender will then understand that they are dealing with one of the PoA meaning houses, thus that they know that you are legally able to sell the home, even though your name is not personally on the deed.

Many homes have been constructed using bricks and mortar. The roofs of these homes are often slate or tile. If your home does not fit this description, then it is considered a non-standard home. A non-standard home may be considered unmortgageable by lending companies. If your home is non-standard, it may have been built after World War 2, during the housing boom. During this time many homes were built using non-traditional techniques. You may have had a hard time obtaining insurance on your home. This is because it is non-standard. The solution for this is to hire a contractor to complete structural repairs, including utilising Pre Reinforced Concrete (PRC). If you take this course, be sure to get a certificate of structural completion from a qualified engineer. Presenting this to the mortgage company of your potential buyer will increase the chances of your buyer being able to get a mortgage to purchase your home.

Unfortunately, the Grenfell disaster has affected so many property owners due to the legislation that was put into place flagging cladding as a risky building material. Cladding was so commonly used, that thousands of us, as property owners are now in the predicament that selling our homes is almost impossible because very few lenders will advance finance without a valid EWS1 form. To get this form, the cladding has to be removed and something else that meets the guidelines the government has set forth must be used instead. The problem with replacing the cladding is that it is incredibly expensive. The funding to have this work completed simply isn’t there, even when property owners bring their money together. There has been a bit of give on the lenders’ side, though. If the cladding is under eighteen metres, it is considered mortgageable.

For a property to be mortgageable, it must meet modern-day building regulations. When only one layer of external bricks is present, then, this is non-standard and does not meet the regulations. Therefore, this deems the property unmortgageable. The surveyors report that one course of external bricks is unstable, not energy efficient, not adequately soundproofed, as well as being prone to moisture penetration (damp). The solution to this would be remediation. Remediation for this is expensive and the property has to be vacant during the work so that another layer can be added from the inside. Be aware, though, that if your property, like many in this situation, was built in a previous century, it may be incredibly tricky. It may even prove to be impossible. But, if your property forms a section of British heritage in a prime location, then lenders may be a little more flexible and may advance the loan with stipulations to be followed.

There are new-build developers who manufacture homes in a factory, often referred to as modular housing, then transport the home and assemble it on site. These are still considered to be in a stage of experimentation. The technology used makes the homes delivered much quicker than the traditional build homes. If you happen to be selling one of these types of homes, your buyers may not be able to find a lender who will deem your home as mortgageable. Your best solution for this issue is to get into contact with the original housebuilder and ask them to provide you or the mortgage lender with proof that the home is technically sound.

A roof is an integral part of the home. A home may be deemed unmortgageable if the roof is flat, is sagging or has major damage. Further, if the roof is made from something other than concrete, clay tile or slate, the lender may not advance the mortgage. Some roofing materials that may become an issue when trying to sell your home to a buyer who needs to get a mortgage could include corrugated seam metal roof material; steel; solar tile; asphalt composite shingles; wood shingles; synthetic rubber slate; green or vegetated or eco-friendly materials; thatched roof. If part of your roof is made from these types of materials but is not included in the square footage, then the lender would not pose an issue. The solution for this type of issue is to hire a contractor to replace your roof with an approved material.

As a seller, if you have worked to improve your property with something like a side extension or an upper extension, but you did not obtain the planning consent that is required, then your property could be unmortgageable according to many lenders. There are a couple of possible solutions to this issue. You, as the seller, can attempt to gain retrospective planning consent. The second option, which may be requested by the local authority, is to demolish the addition that you completed. Be aware, though, that the demolition, even if it is requested b the local authority will be paid fully by you.

Property blights, including bad views, bypasses or other roads, railway lines, airports, factories, or industry buildings, which disrupt your neighbourhood may result in your property being unmortgageable by the lenders. This is usually found during conveyancing searches. If, however, the impact on everyday life is low, the lenders may go ahead and advance the loan for your buyers.

Negative Covenants, also called restrictive covenants, are terms which have been placed on the Title Register, and keep the property from being used for specific purposes. A common requirement seen is that a home can be sold only to a specific age group or a specific demographic of people. Thus, a lender would deem it unmortgageable to those that do not fit the requirements. The only solution to this would be for you, as the seller, to seek legal counsel and possibly head down the legal road.

The property can have followed all of the planning regulations, but the building inspector to not approve the works that have been done. If this happens, then the lender may be denied the mortgage. The solution is to obtain the correct certification and/ or compliance documentation. To do this, you would just need to correct what the building inspector did not approve of, such as replacing something like doors or railings. Once your documentation is in place and you can provide it to the mortgage lender, they will advance the loan.

In 2015, the UK put into place a standard which sets a minimum floor space that must be met at thirty-seven square metres. Thus, every unit over that is fine. However, units under that number are going to be unmortgageable by most lenders. If the Energy Performance Certificate has been produced on your property within the past ten years. You can look up the size of your property if you are unsure. The solution, if your property is under thirty-seven square metres is to get planning consent and then extend your floorspace. If your property is in a building (i.e. a flat) you may have to work with other property owners to be able to revamp the space so that everyone has the minimum size needed to be able to sell to a buyer who may need a mortgage.

Obtaining a loan on a commercial property may prove difficult if using a mainstream lender. However, if you are selling a commercial property, your buyer may want to find an experienced broker who can help find a mortgage company that offers flexible lending policies. Mixed-use properties like residential properties over shops or offices also often pose the potential of being considered unmortgageable by many lenders. However, some lenders will advance the loan if the buyer adheres to lower to loan value requirements like a higher deposit or an insurance policy with a higher deductible.

Flats in high-rise buildings, so those that are more than five to seven storeys high may be tricky to obtain a loan for. Some lenders will, however, advance the loan for properties that are on a lower floor. Also, some lenders will advance the loan for these flats if they are in a prime market area which could result in high rental income.

Many council homes in one area may yield lenders worrying about the possibility of resale values being low and thus they may not advance a loan for these homes. But, if the location of the homes is one where resale may be higher or if the number of homes is low and thus resale is more attainable, then mortgage lenders may be more willing to advance a loan. If you are selling a council house, the best solution is to encourage the buyer to work with an experienced and qualified mortgage broker, as this expert can help them find finance options that would be available to them to buy your council house.

If you are selling buy-to-let and have issues including evidence that there are arrears or non-consistent rental payments, any issues about Section eight or Section twenty-one eviction proceedings, rent is set at market value, current tenants rely heavily on Local Housing Allowance payments, or there are missing AST agreements, then it may be difficult for a buyer to obtain financing for the buy-to-let purchase. The solution to this problem will be to resolve any of the previously mentioned issues with tenants. Resolution of the issues will result in your property being mortgageable.

When a property has been the scene of a crime, lenders hesitate to advance a mortgage to buyers due to the possibility of a decrease in the value of the home. Lenders look strongly at the repercussions of the crime as well as the extent of the crime. The solution will be to be sure that the property you are selling has been refurbished since the crime occurred. Also, make sure that your buyers are working with a reputable mortgage broker who can help them to find a lender who may advance a mortgage with certain stipulations in place such as higher interest rates and an insurance policy with a higher deductible.

If you are a seller with an unmortgageable property, you may find yourself turning to Rightmove, Zoopla or On the Market, which are the three of the main property search portals in the UK.

As a buyer, if you are looking for properties that the lenders have deemed as unmortgageable, then you can request the previously mentioned sites to send you alerts when such properties are placed out on the market.

When you list a house on one of the sites, as a seller, you will specify if your property is aimed at cash buyers or why the property has been deemed as being unmortgageable. As a buyer, you may need to get in contact with the estate agent to obtain further information about the house that may not be provided on the site.

You can also utilise independent sites to list your property privately, as a seller. As a seller, it is important to be transparent with buyers or potential buyers about why your property has been deemed unmortgageable. As a buyer, be aware, that not all sellers are transparent. Some of the private, independent sites include Gumtree’s property pages; eBay’s property pages; Home.co.uk; Mumsnet’s Local Pages; The House Shop; Residential People; Net House Prices; Mouseprice; Property Heads; Property Mutual; House Ladder; Propertini; Homes 24; Property Pigeon; Placebuzz; Renovate Me; Property Rennovate; Nuroa; Trovit Renovations; Wreck of the Week.

How To Sell And Buy An Unmortgageable House?

When a house is labelled unmortgageable, it speaks very loudly of the home. However, you can often make the necessary repairs or mitigate issues to change that label. The effort and money needed to change that label largely depend on how large the problem is. Of course, if you choose not to change that label due to a lack of time or funds, you can sell to investors or cash property buyers who are looking for a project. If you are struggling with getting your unmortgageable house sold and you are not sure where to look for cash property buyers, seek out specialist agents, auctioneers or direct home-buying firms. Their goal is to get your property sold and their target market is the cash buyers.

On the other hand, if you are a buyer of an unmortgageable property also referred to as a damaged house for sale, be sure, first to understand why the home was labelled this way and what it will cost you to fix the problem that got the home into this type of situation. Be aware, that with homes, when mitigating problems and fixing issues, there are sometimes problems hiding under the surface and once the surface is lifted to fix the original problem, others may arise, so be sure you budget for such scenarios. Of course, once you have fixed or mitigated the problem, you have made the property mortgageable again for the next buyer. Also, you may be able to still obtain a mortgage on a property that the lender has marked as nonlendable. In the mortgage process, some underwriters review all of the documentation. The underwriters are the ones who have the final say as to whether the loan is going to be approved or not. They can place certain conditions that you or the seller would have to make happen, then they can approve the loan when those conditions have been met. What does this look like? The underwriters may say that your mortgage can be advanced if you can pay a higher deposit than you were originally going to pay. Or, the underwriters may choose to loan you the money if you will agree to a higher interest rate than what was previously proposed. Another option that may be offered to be able to advance the loan is for you to increase the premium on the insurance policies you were going to take out on the home. If, however, your lender is still unwilling to advance you the loan, talk to specialist agents or a broker. These are experts who can help you search for a different lender who may be willing to lend you the money for the property you desire, even with the red markings on the surveyor’s report.

So, as you are preparing to sell your home, do a good look around to see what you notice. Keep in mind the above-mentioned issues that surveyors commonly are on the lookout for. If you notice issues that need to be addressed, take care of them before you list your home to sell. Some of the above-mentioned issues with houses are often only caught by surveyors due to their expert knowledge and understanding. So, if they do return the report to the bank with red marks, take the time to examine the problems, hire a professional to fix the problems, get a report from your experts to show what they did to mitigate the issue and return that report promptly to the lending bank of the buyer. The faster you can be at fixing the problems properly the less likely you are to have the sale completely fall through. If the issues cannot be fixed for one reason or another, look into cash property buyers. They will generally give you a bit less money but will purchase the property as-is.

If you are the buyer and your lending institution is being sticky about advancing you a mortgage due to any of the above issues, decide how important purchasing that property is to you. If you are still in love with the property, work with your lender to see what you can do to alter the terms so that you can still get the mortgage. Let them know your flexibility on the down payment amount, the interest rate or the property insurance premiums. If they still refuse, then seek out another lender who will meet you where you are and where the property is and will offer you a mortgage for your dream home.

We are proud members of...

  • NAPB
  • RICS
  • The Property Ombudsman
  • Trading Standards

We are proud to be the most regulated property buyer operating in the ‘Quick House Sale’ industry. We are an active member of the NAPB (National Association Of Property Buyers) and are RICS regulated, which means you can have every confidence of selling your home with us quickly & easily.