Having your mortgage application declined can be soul-destroying, especially if you’ve found the property of your dreams.
Before you begin your property search, it’s therefore a good idea to familiarise yourself with some of the common reasons mortgage applications are refused. This can help avoid heartache later down the line, as you’ll be aware of the sorts of things which could cause you issues. Not all are insurmountable, and there may be specialist lenders still prepared to offer you a mortgage, but it won’t be plain sailing.
Here’s our run down of some of the reasons you might not be able to get a mortgage, and where to go for more help.
- 1) The property has spray foam insulation
- 2) The property is of ‘non-standard’ construction
- 3) The property is above commercial premises
- 4) There’s an estate rent charge payable
- 5) The property is in a high rise block
- 6) The property has a short lease
- 7) There is Japanese knotweed growing near the property
- 8) The property is in a known flood risk area
- 9) The property has subsidence
- 10) The property has cladding
- Where to go for more help
1) The property has spray foam insulation
Energy bills are soaring, which has prompted many homeowners to look at ways they can better insulate their properties. However, if the property you want to buy has been insulated using spray foam insulation, your mortgage application could be rejected.
Spray foam insulation, or spray polyurethane foam (SPF), is a liquid that you spray onto surfaces you want to insulate. The foam expands and solidifies, filling gaps and keeping drafts out. Whilst this might sound a very sensible way to make your home more energy-efficient, lenders take a less favourable view.
This is because if the roof has been fully sealed using this type of insulation, it can restrict the movement of air to the roof and timbers, resulting in condensation. If timbers are exposed to condensation for a prolonged period, it can cause them to rot. The timbers can also be affected by how hard the insulation sets, as it can put a strain on them, distorting the fabric of the roof.
Arranging to have foam insulation removed won’t necessarily satisfy your lender either as it may have already damaged the property. A lender is only likely to accept your mortgage application if they’ve received approval from a valuer, and if the insulation used meets their criteria.
2) The property is of ‘non-standard’ construction
When you apply for a mortgage, your lender will want to know whether the property is of ‘standard’ or ‘non-standard’ construction. Standard properties will be constructed with brick or stone walls and a roof made of tiles or slate.
Properties which fall under the non-standard construction category include timber framed homes, those constructed out of concrete, and log-style cabins. Lenders are often reluctant to offer mortgages for these types of property because they perceive them to be at greater risk of requiring more maintenance than standard properties, and because there is typically lower demand for this type of property compared to more traditional homes. They may also be concerned about you getting insurance for a non-standard home.
That said, there are lenders who will consider mortgage applications for non-standard properties, although these will usually be treated on a case-by-case basis. Bear in mind that lenders who are prepared to lend on this type of home may impose stricter affordability requirements and charge higher interest rates than if you were applying for a mortgage on a standard home.
3) The property is above commercial premises
If you want to buy a flat above a commercial residence such as a pub or restaurant, you might struggle to get a mortgage, because lenders generally consider that these properties are likely to be harder to sell on in future.
There’s likely to be more noise, and smells if it’s a restaurant, plus the chances of anti-social behaviour happening nearby are also higher, so you may need to turn to a specialist lender for help. Lenders are more likely to approve a mortgage on a property above or next to commercial premises if properties in the area are in high demand, or if the commercial premises is home to a shop or retail outlet rather than a pub or restaurant.
4) There’s an estate rent charge payable
If you want to buy a property on an estate and there’s a rent charge payable to a management company, then even if this charge is for a tiny sum, it could cause lenders to reject your mortgage application.
This is because if the rent charge goes unpaid, the management company could take possession of a freehold house, and may not even need to serve notice before exercising this right. As a result, lenders will often refuse mortgage applications on properties where rentcharges are involved, as it poses a threat to their security.
Estate rent charges are most common where there are communal areas, such as a private road or gardens, which are managed by a management company. One way around rentcharges is to include a ‘deed of variation’ which means the management company must give notice before taking any action, but all property owners on the estate must agree to this.
5) The property is in a high rise block
A flat in a high rise block might provide you with impressive views, but lenders are often cautious about providing mortgages for this type of property, especially if it is ex-local authority.
High rise blocks are typically considered to be those over seven or 10 stories high, depending on which lender you approach. If you’re buying a flat below the seventh floor, you shouldn’t have too many issues getting a mortgage, but if it is above this floor, it might be tricker for you to get a mortgage. This is because high rise blocks may require expensive maintenance works, which can bump up the cost of service charges, making the property harder to sell on in future.
If the flat is in a large block, the lender may also be concerned about overexposure if they’ve already offered mortgages to buyers elsewhere in the building.
6) The property has a short lease
You might struggle to get a mortgage on a flat which has a lease of less than 70 years on it. You might be able to extend the lease, or request that the seller does this, but the cost will depend on several factors, such as the value of the property, the level of ground rent and the number of years it has left to run.
The Leasehold Advisory Service has a calculator to give you an idea of how expensive extending your lease could be. Under government proposals leaseholders in England will be offered the opportunity to extend their lease by up to 990 years, with no ground rent payable. It is not yet confirmed when these rules will take effect, however. If you’re thinking of buying a property with a short lease, make sure you check your lender’s criteria before you apply for a mortgage, as they might be unwilling to lend, or may require you to pay off the mortgage before the lease reaches a certain number of years.
7) There is Japanese knotweed growing near the property
Japanese knotweed was originally brought to the UK by the Victorians, who used it to line railway tracks because it grows quickly. However, the plant is highly invasive and can quickly cause structural damage to homes, devaluing them and making them difficult to sell on, which is why you’re likely to struggle to get a mortgage on a property where Japanese Knotweed is growing nearby.
Hanna Isitt, GoCompare’s home insurance expert, said: “It’s no surprise so many people are wary of Japanese knotweed. The plant’s speedy growth can cause a whole host of problems, from damaging tarmac, paving and drains, to making the walls of your home unstable. The presence of Japanese knotweed can mean your mortgage application is denied, even if the plant is thought to have been destroyed.”
You can find out more about Japanese knotweed in our guide What is Japanese Knotweed and will it affect your mortgage?
8) The property is in a known flood risk area
Trying to get a mortgage on a property which is in an area that’s at risk of flooding can be challenging. Some lenders will refuse your application because they’re concerned that if the property does flood, its value will reduce and it will be difficult to sell on.
However, there are specialist lenders who may be prepared to accept mortgage applications if a property is in a flood zone, as long as they are comfortable with a surveyor’s report and assessment of the risks to the property. You will also need to prove to the lender that you can obtain adequate building insurance for the property.
9) The property has subsidence
Lenders are often wary about providing mortgages on properties with subsidence, as they may be worried about the impact this will have on future values.
Subsidence occurs when the moisture level of the ground that the property has been built on changes, which results in the property’s walls cracking, and windows and doors warping. Whether or not you’ll be able to get a mortgage on a property with subsidence will depend on the level of subsidence (this will need to be determined by a surveyor) and what steps have been taken to remedy the problem.
If the subsidence is severe, the property may be considered unmortgageable and only cash buyers will be able to buy it.
10) The property has cladding
Cladding has become a major issue for lenders following the tragedy of the Grenfell fire in 2017, when it was discovered that it was responsible for the terrible speed at which the fire spread.
If you’re trying to buy a property in a flat which has cladding, the vast majority of lenders will insist on seeing a ESW1 certificate, which is obtained following a survey of the property’s external walls to check for combustible materials.
Unfortunately there are only a limited number of surveyors qualified to provide ESW1 certificates, so you can face a wait of many months – or sometimes even years – just to book a survey, with no guarantees you’ll be offered a mortgage after it takes place. If the cladding is found to be unsafe, you’ll usually be refused a mortgage until remedial action is taken. The good news is that change could be on the cards, with Lloyds Banking Group in December 2022 updating its guidance so that it no longer requires an EWS1 form for mortgage applications to proceed on properties in England that are five stories or higher.
If you’re already living in a property which has cladding and you’re looking to remortgage as your existing deal is coming to an end, then you should be able to remortgage with your current lender, provided you’re up to date with repayments and you’re not looking to borrow any more.
Where to go for help
If the property you want to buy or release equity from falls into any of the above categories, it’s worth seeking professional advice on the options available to you.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for somewhere to start, you can speak to a Rest Less Mortgages advisor and get high quality advice on residential, retirement interest-only, equity release and buy-to-let mortgages.
Bear in mind that if your circumstances are complex or you’re worried about being accepted for a mortgage, it may be worth speaking to a specialist mortgage broker. These can come with an additional fee, but may be more suited to borrowers that might require a tailored approach.
If you’ve already had your mortgage application refused, our article What to do if your mortgage application is declined explores some of the steps you may be able to take next.
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