Selling an Unmortgageable House

Your house has been on the market for months. It’s getting plenty of interest; you’re inundated with viewings and have even had several good offers. But none of them sticks because every potential buyer has been refused a mortgage on your home. Sound familiar? 

There are several reasons a property becomes unmortgageable. In this guide, we’ll explore what an unmortgageable property is and your options for overcoming these obstacles to secure a sale. Selling an unmortgageable house is possible; it may just require a little extra effort.

What Does “Unmortgageable” Mean and Why Should You Care?

Not every property fulfils mortgage lenders’ criteria. If your house is unmortgageable, your pool of potential buyers will be limited to cash house buyers — a rare and precious commodity on the open market; most buyers need a mortgage to fund their purchase. 

If your home is unmortgageable, it will take longer to find a buyer, and you’ll probably have to compromise on price.

What Makes a Property Unmortgageable?

Unfortunately, there’s a long list of reasons a buyer may struggle to secure a mortgage on your property. Even if you have a mortgage on your home, changes to the property (intentional or unintentional) may now render it unmortgageable. 

There is no kitchen or bathroom.

These are considered essential facilities for a habitable property. Some lenders will insist on a heating system being in situ too.

The property is uninhabitable.

If a property is derelict, empty or abandoned, a mortgage company will not lend on it; they will only approve loans on properties suitable for human habitation.

There are structural problems.

Serious structural issues, such as subsidence or a lack of damp-proofing, will not meet a mortgage lender’s criteria. This is one of the most common problems.

Japanese knotweed is present on the property or nearby.

This fast-growing invasive plant can damage properties and is extremely difficult to get rid of. Read our guide on selling a property with Japanese knotweed.

The property is of ‘non-standard construction.’

A “non-standard construction” is a building that doesn’t have brick or stone walls and/or has a roof made of materials other than tile or slate. 

The property has two kitchens.

You may think adding extra facilities will increase the value of your home. But a property with two kitchens could be unmortgageable because lenders may deem it a property that could be sub-let rather than a standalone residence. 

There is severe damp, dry rot or wet rot.

If severe enough, these “structural deficits” will render a property unmortgageable. Learn more about dry rot in our dedicated guide. 

The property has a history of subsidence or flooding.

Or there is a high risk of flooding; for example, houses located close to mining works or landfill areas.

The property has fire damage.

Fire-damaged properties are challenging to sell on the open market and usually sell off-market.

The property has sitting tenants or a regulated tenancy.

If the tenancy began before 15 January 1989, you have a regulated tenancy. Most lenders will not approve a mortgage on a property with a sitting tenant, especially a regulated tenant.

The property is valued at less than £50,000.

Most mortgage lenders will not approve a loan on very low-value properties; you’ll need to find a cash buyer.

The lease remaining is less than 70 years.

The fewer years left on a leasehold, the harder it is to sell; most lenders will reject a mortgage application for short-lease properties — those with less than 70 years remaining.

There is an ongoing boundary dispute.

Disagreements between neighbours over issues such as fencing, pets and noise could render a property unmortgageable. Read omre aobut Boundary dispute.

Alterations or extensions have been made without permission.

You may have added an extension or converted the loft into a bedroom with the best intentions. But if you didn’t get the necessary planning permission or the work fails to comply with building regulations, buyers will struggle to get a mortgage approved.

The property has a defective lease.

If the terms of a lease are poorly drawn up, and it is impossible to discern where key responsibilities lie — with the leaseholder or the freeholder — a mortgage company is likely to be reluctant to lend on the property.

Commercial or part-commercial properties.

If your property is a residence but is above or next to commercial premises, many lenders will refuse a mortgage.

Properties in an area with a high concentration of council or social housing.

If your home is surrounded by council or social housing, some lenders may be wary of approving a mortgage on it.

High-rise flats.

Many lenders refuse mortgages on flats over five-storeys high.

The property has never been registered with the Land Registry.

Mortgage lenders must have proof of ownership before approving a loan. If your house has never been registered with the Land Registry and you don’t have the title deeds, they won’t be able to lend funds to your buyer.

‘Flying’ or ‘creeping’ freeholds.

A flying freehold overhangs or underlies another freehold; for example, a balcony that extends over a neighbour’s property. A creeping freehold underlies a different freehold; for example, a cellar belonging to one freehold extends under a neighbour’s property.

The property has an unfavourable ground rent.

If the ground rent is extremely high or increases every five or ten years, a mortgage adviser may reject a loan application.

There are extensive development plans nearby.

If your home is located next to a site with plans for major development, such as a bypass or airport extension, lenders are likely to be cautious about granting a mortgage as the impact on the property’s value is unknown.

There are certain restrictive covenants in place.

A restrictive or “negative” covenant restricts a homeowner from taking a specific action, such as using the property for business purposes. Some — not all — such covenants will affect whether the property is mortgageable or not.

This is a long but not exhaustive list. If you’re losing buyers because they can’t secure financing to buy your home, contact an expert to find out if your home is unmortgageable.

However, this is not a black and white decision — whether your property is “unmortgageable” or not depends on the individual mortgage provider’s lending criteria. Some mortgage companies will give a flat “no” to mortgage applications on problem properties. Others may agree to lend funds on strict borrowing and repayment terms. There will almost certainly be a higher interest rate, and there may also be a lower loan to value (LTV) available and a bigger deposit required — all of which will make finding a buyer a challenge.

How Can I Sell My Unmortgageable House?

If your property is unmortgageable, you have several options to choose from:

• Correct the problem causing the issue. Any issue making the property unmortgageable is not likely to be a quick, easy or cheap fix. But eradicating the problem will allow you to sell the property.
• Sell your house to a cash buyer. An individual or cash buying company will have the funds to buy your property outright, so a mortgage won’t be necessary. Some people, such as property developers, will actively seek out unmortgageable property for sale because they want to bag a bargain that they can add value to.

Selling an Unmortgageable House FAQs

What makes a property unmortgageable?

Any residential property that a mortgage lender refuses to grant a house buyer a loan for. Potential reasons for a property being unmortgageable are outlined above and include uninhabitable buildings, properties with structural problems and unusual constructions.

Will dropping the asking price help me to sell my unmortgageable property?

Reducing the asking price would increase your chances of selling because buyers who need a mortgage will require a smaller loan which is more likely to be approved by a lender. However, the amount you would need to drop the asking price by could be significant, and if you are selling to buy a new home, this could make your onward move problematic.

Should I fix the problem with my unmortgageable property to help it sell?

This is certainly one option. If you have the time and means to complete the work necessary to make your property mortgageable, your chances of selling will increase. However, if your home is currently unmortgageable, the chances are that the work required to change its status will be significant, and any money you spend on making improvements will eat into the sale proceeds. 

How long will it take to find a buyer for my unmortgageable property?

If you sell on-market via an estate agent, you could get lucky and find the right buyer straight away, but it’s more likely that it will take months or even years for someone with the means to make renovations or buy the property outright to come along. Your chances of selling via this traditional route will depend on several factors, including the desirability of the property’s location, the long-term return-on-investment potential and the current housing market. Selling via a traditional or modern auction may deliver quicker results as buyers must complete their purchase within 28 to 56 days. However, there is no guarantee that your property will sell. The best way to get a guaranteed quick house sale without paying estate agent fees is to sell to a genuine cash house buying company like House Buyer Bureau.

House Buyer Bureau is one of the leading cash buying services in the UK. We have the funds to buy any type of property in any condition or location. We don’t need to secure finance to purchase your property, so its unmortgageable status will not affect the sale.

Get in touch to request your free cash offer today.

Chris

Chris

Chris has worked in property all his career, first as a successful estate agent before spotting a gap in the market for buying property directly from people looking for a simple, quick sale.

He has a passion for property and as an experienced valuer, has looked at well over 50,000 properties so far at HBB. He has extensive experience in property buying and regularly comments in the press on property matters, trends and promotes ways to simplify and speed up the selling process.

View articles by Chris