Non-Standard Construction Mortgage
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Non-Standard Construction Mortgage
Scott explains the m ain considerations for a non-standard construction mortgage.
What is a non-standard construction mortgage?
There’s lots of variants to that, but the simple answer is that if a property isn’t made of brick with a slate roof, it’s probably non-standard. We’ll probably go through the different elements within the podcast that are seen as construction types. But if it’s not a brick or stone with a tile or slate roof, it probably is non-standard.
What kind of properties fall under this category? What types of construction are considered non-standard?
I’ll give a few examples. It’s not an exhaustive list, so a property type that doesn’t fall under what I’m about to say might still be non-standard.
Non-standard homes include timber framed, steel framed or prefab properties. There are older types like cob houses, which are made with mud. There’s wattle and daub, which involves straw and mud together. There’s lots of very old types we find around the UK, so lots of things fall under that heading.
What are the main challenges of securing a mortgage on a non-standard construction property?
They’re not as difficult as you might think. A lot of lenders will do them. The primary tick box for most lenders is whether it fits with the local area. Certain housing developments are made of different types of concrete, or they’re structured differently.
Housing estates that were built post-war, for example, would be considered non-standard. But because the whole area is built in a certain way, lenders can still be happy to lend on them.
The first thing to do is speak to a broker. Identify what type of property you have, and then that broker can tell you what difficulties you might face. But the challenges shouldn’t be too great. It might just mean a couple of extra surveys.
How does the approval process for a non-standard construction mortgage differ from a traditional mortgage?
It’s just for the lender to check that the property is good security for them. Obviously a valuation takes place every time, anyway. In this case it will be a full valuation.
The valuer might come back with some comments and require certain extra reports, like timber and structural reports. There might be some other parts that the valuers want to see to make sure the property is safe and secure.
But as long as those reports come back fine, there should be no other differences for you going through that process.
Are there any specific requirements for borrowers looking to secure a mortgage on a non-standard construction property?
Not particularly. The Loan to Value will be in line with all other property and the products that you’re looking at. Whether it’s residential or buy-to-let, the products will be largely the same and the Loan to Values will be the same. The rates should be very similar.
The main difference is your choice of lender. Some lenders are happy with certain types of construction while others aren’t. Some are happy with all of them, while others don’t touch any.
Your broker can take you to the right place, present the case correctly, and then your process should be very similar to everybody else’s.
How can borrowers improve their chances of being approved for a mortgage on a non-standard construction property?
Speak to a broker. Presentation is a very key point, along with approaching the right lender. There’s a lot of criteria in the background that we will cover off for you that makes the transaction much easier.
If you go out and start speaking to banks directly you might find a lot of rejections before you find the right lender. So have a chat with a broker.
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How do lenders assess the value of a non-standard construction property?
It’s identical to how any other property would be valued. There might be caveats regarding saleability.
So if your property is non-standard, but it’s in an area where there are a lot of other similar properties, the saleability of your property will be fine. There are probably quite a number of transactions happening within a mile’s radius.
Meanwhile, if the home is very unique and very different to the local area, it might be harder to sell. So if you happen to have a cob house, but everything else around it is a standard brick construction, a valuer might comment that it has limited saleability.
That might reduce your borrowing amount from the lender’s perspective, but the property value itself shouldn’t really be affected.
What kind of deposit is typically required for a non-standard construction property?
The product shouldn’t really be any different. It would be a standard product. If you’re going down the Buy to Let route, you would need a 25% deposit for a 75% mortgage.
If it’s something you’re looking to purchase as a home to live in, a 10% or 15% deposit should be absolutely fine. We just again need to prove the property is of sound build, will be comfortable security for the lender and we can obtain any extra reports we need to cover off. That might include damp, timber or structural reports.
Are interest rates generally higher for non-standard construction mortgages?
No, but you might find that the high street lenders aren’t necessarily available to you, depending on what your construction type is.
Although the rates aren’t specifically higher on non-standard properties, you might find you have slightly fewer options with lenders. Therefore you might end up with a product that’s not completely market leading because you can’t take the best high street rate at the current time.
But rates should be pretty on par with the high street anyway. It should be in the right pricing area.
How long does the application process typically take for a non-standard construction property or mortgage?
If we’re talking about a Buy to Let, I would say eight weeks. That allows for some dragging of heels through the conveyancing process orr problems with booking a valuation. Eight weeks should be plenty of time.
Similarly, with a residential purchase, I would say six to eight weeks is fairly standard. You shouldn’t have any additional delays to that process. Although, if the valuer or the lender require extra reports to be done, that can add in a small delay, but shouldn’t be anything more than a couple of weeks.
What advice would you give to someone looking to secure a mortgage on a non-standard construction property?
I would probably ask about their motivation in the first instance. What is it about this property that’s attracting you?
It might be that it’s got a lot of character, you want to live there long-term or you want to renovate it for a Buy to Let or holiday let, which is absolutely fine. Understanding the long-term purpose and goal for that property is a key point.
If it’s residential and you plan to live there for a long time, saleability isn’t your main concern. But if it’s an investment property like an Airbnb or Buy to Let, understanding what impact that might have in the future is important.
So we just need to understand what the goals are, how long your plans are for and what the local area is like within a mile radius, in terms of other construction types. A broker is key in helping you plan ahead.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
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