Are Lenders Averse to Mortgages For Flats?

Mortgage lenders are sometimes fickle creatures. As their assessments change from time to time on whether or not a loan is sound, it might seem that they pick and choose just what type of properties on which they are more comfortable advancing a mortgage.

Conventionally, for example, mortgages for flats have often been considered more "risky" and potential buyers, therefore, found it more difficult to secure a loan.

Although some lenders might be averse to advancing mortgages on this type of property, however, there are many others who are less so. The following observations, therefore, might help you in finding and negotiating such a mortgage.

Freehold or leasehold?

Some flats are sold freehold, but many are sold leasehold. In the latter case, you are be buying the right to live in the property for a given number of years, whilst the owner of the freehold continues to own the ground on which the flat or flats is built. At the expiry of the lease, ownership of the property reverts to the freeholder.

Leaseholders, therefore, typically pay a ground rent to the freeholder, together with a service charge for the upkeep and maintenance of communal areas inside and outside the building in which the flat is situated.

Some lenders, therefore, may be reluctant to advance mortgages for flats that are leasehold, especially if there is less than 30 years of the lease to run after the end of the mortgage term. The general rule, therefore, is that the longer the lease, the more favourably is a lender likely to consider an application for a mortgage. Most lenders typically set a minimum number of years for which the lease needs to run.

Owners of leasehold flats may often be advised to consider re-negotiating the terms of the lease and seeking an extension to it, once the remaining term has fallen below a typical 70 years.

Common types of property

Some of the most common types of property on which it might prove more difficult to secure mortgages for flats include the following

High-rise

Lenders are traditionally scared of heights. Mortgages on flats above the seventh or eighth floor are often more difficult to obtain. Where the flat is located at such a high-rise level, lenders tend to take even closer interest in the age of the building, the standard of its construction and the overall quality and cost of service and maintenance charges;

Flats above shops

The most likely concerns of lenders are likely to centre on access to the flat and the general standard of maintenance of the building in which it is situated. Access across a commercial yard or flats above potentially noisy businesses such as pubs, takeaways and restaurants, for example, might put off future buyers which the lender might need to attract if repossession becomes necessary. Finding the mortgage

Whatever sort of flat you are considering buying and whatever its location, some lenders are likely to shy away from advancing a mortgage, whilst others might be only too pleased to make an offer. The trick, of course, lies in finding out just who does and who doesn't.

This is an area where it often pays dividends to consult a professional mortgage broker, whose expertise might help in identifying all those lenders most likely to be in the particular sector of the market in which you are interested.

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