What Are Un-mortgageable Properties and How To Get Financing To Buy Them?

What Are Un-mortgageable Properties and How To Get Financing To Buy Them?

Getting the finance you need at the right time might mean purchasing the desired property, or missing an important opportunity. That’s why you should be fully aware of your possibilities when it comes to looking for financing.

In today’s post, we will talk about un-mortgageable properties, and the loan alternatives you have if you wish to purchase such a property. Let’s proceed!

Introducing Un-mortgageable Properties

Before approving your mortgage application, lenders will assess the condition of the property, to ensure that it fits their required standards. In the case in which the lender is dissatisfied with the state of the property, it will be classified as un-mortgageable.

For the most part, a property may fall into this category in the following conditions:

  • Properties that don’t have a bathroom or kitchen.

  • Properties featuring serious structural problems.

  • Properties located in the proximity of areas of landfill, mining works, recent flooding or subsidence.

  • Properties with an unusual or non-standard construction. Standard construction implies stone or brick walls, and a tile or slate roof. Anything different from these might be classified as non-standard.

  • Properties that are on short leases. (For instance, the lease has less than 80 years left).

  • Derelict properties or part of the construction needs demolishing, being in severe disrepair.

  • Properties whose value is small.

Why Should You Consider Purchasing an Un-mortgageable Property?

There is a range of reasons why investing in an un-morgtageable property would be a noteworthy opportunity. For starters, the purchasing price of such a property is much smaller than in the case of a typical house. To that end, if the property were improved, its value would imminently increase. On that note, such a building might appear as a viable alternative for a property developer’s next project.

In other words, many un-mortgageable properties have unmatched potential. Hence, they shouldn’t be allowed to go to waste. Still, if traditional lenders don’t offer to finance for such situations, what are your alternatives? We’ll get right on to that.

Bridging Loan – A Viable Solution

A bridging loan is a quick form of financing that is specially tailored for short-term usage. You can use such a loan to either buy or refinance an un-mortgageable property. As noted before, if, at the time of the purchase, the house isn’t considered habitable by traditional lenders, you cannot obtain a traditional form of financing.

Nonetheless, bridging lenders allow property traders to buy properties which necessitate serious renovations and improvements before aiming at reselling them. Improvements such as installing a new kitchen or bathroom, or making non-structural changes to the layout are covered by this type of financing.

Concurrently, bridging loans come with a handful of extra features, such as the roll-up interest. This allows developers to roll-up the interest expenses into a major lump sum, and pay it at the end of the financing, which can be genuinely convenient if one plans on reselling the property.

We hope that this article has shed some light on the topic of purchasing un-mortgageable properties. Happy investing!

No comments yet.

Leave a comment