An unusual home doesn’t mean an unusual mortgage, as Hilary Osborne, editor of What Mortgage, magazine finds out.
Many of us would like a property with that ‘wow’ factor – the kind of home that stands out from the crowd. Perhaps you want to move up in the world to a 15th-floor apartment, or maybe a thatched cottage lights your fire. If the only thing that’s stopped you living your dream is the fear that it will require an unusual mortgage, it’s time you thought again.
Some lenders’ stated criteria rule out certain types of property or those in certain situations. For example, Coventry Building Society states that the building must be of acceptable construction: ‘This generally means built of brick or stone with a tile or slate roof.’ It also rules out flats in blocks that have more than five storeys and those above certain commercial premises.
Yet many lenders are prepared to take on homes with a difference. ‘We will lend on virtually anything – even houses made of straw,’ says Stephen Penlington, general manager at Norwich & Peterborough Building Society. The only kinds of dwelling ruled out straightaway are barges and motor homes as, being portable, they don’t provide good security for the loan.
This is the key issue for lenders, says Penlington. ‘As long as a property has a marketable value and a resale value and it reaches building regulations in terms of construction, we would be happy to offer a mortgage on it.’ The lender will be guided by a valuer, as with any property.
How it works
In the first instance the lender will request a standard valuation. ‘If the valuer said we needed to look more closely at certain aspects we would do that,’ says Sian Lehrter, head of mortgages at HSBC. ‘On a building with an unusual construction, specialist reports may need to be done to convince the lender that it’s a good risk. On a thatched cottage, for example, there are certain things that will need to be looked into before a loan is granted.’
Ipswich Building Society has a number of thatched properties on its books. Sales and marketing director Paul Winter says: ‘With thatched properties there are two things to look at. One is the thatch itself; good thatch should last 20–30 years, so the valuer will look to see how many years it has left.’ The second thing is the property’s foundations, as thatched buildings tend to be old and are not built to modern standards.
If the valuer reports that the thatch is near the end of its life, the society may request a specialist report to see how much it will cost to replace. ‘We might make a retention on the mortgage or we might make it an undertaking for the borrower to get the work done within a certain period,’ says Winter.
The same approach would be adopted by lenders for any property that needed work to bring it up to a mortgageable value. In fact, where a lender is willing to take on your chosen home, it is unlikely to treat you any differently from any other borrower. ‘We don’t differentiate on anything, not even on maximum loan to value (LTV),’ says HSBC’s Lehrter. However different your home, if it offers adequate security to your chosen lender, your mortgage needn’t be at all unusual.
Case study: Cabin fever
Clive and Samantha Mitchell live on Dartmoor with their three teenage daughters. Their home is a Canadian log cabin set in seven and a half acres of land. Clive says: ‘The man who owned it before lived here for ten or 12 years in no more than a tin shack. He finally got planning permission and built a lovely four-bedroom timber house.’
Just a month later the owner decided to sell up; ‘So we had all the advantages of having a brand new home, without doing any of the work,’ says Clive. The family were living nearby in a converted barn when they started to think about moving, but they hadn’t started looking seriously when they found the property. ‘As soon as we saw it, that was it,’ says Clive. ‘We fell in love with it immediately – primarily because of the location.’
Funding the purchase wasn’t a problem. Clive already had a mortgage from HSBC and had a good relationship with the staff at his local branch. ‘I didn’t think they’d let me down, and they didn’t,’ he says. No special surveys were required and the purchase was completed in April 2003. Since then the family has installed a new kitchen and rebuilt a stable block for their three horses, and they now have an impressive home. ‘Everybody that visits is totally gobsmacked,’ says Clive. ‘You can’t see it at first because of the trees – then you come round the corner and there it is.’