The majority of lenders want to know if a property is good security for the loan, so in the unfortunate event of repossession, they can resell it easily. The worry is that the more unusual the property, the more limited the market.
Therefore, exotic conversions, timber-framed properties, thatched cottages and grade 1,2, and 3 listed properties can all fall victim to the big banks' strict and increasingly automated lending criteria - but don’t worry, that doesn’t mean it’s impossible.
Make an enquiry and we’ll refer you to one of the listed property mortgage experts we work with to give you the right advice.
What do lenders define as a listed building?
Mortgage lenders will recognise the traditional listing process and decide on whether or not to lend on the property depending on the grade and the valuers’ comments about its condition.
A listed building is a property that the National Heritage List for England has named as being of specific historic or architectural interest. This means that the building is protected by law and must be maintained according to a set of rules.
What are the different grades and how do they impact mortgages?
There are different levels of listed buildings, and each has a different implication when it comes to mortgage approval:
Grade l is the top level and are classed as “buildings of exceptional interest”. Often these properties require the most care. For this reason, most lenders do not consider grade 1 listed property, due to potential issues with ageing structure and its habitability or sale ability. Thankfully there are several mortgage lenders happy to lend on grade 1 listed property.
Grade II* is the next level, and slightly more common, categorised as “buildings of particular importance, of more than special interest”. These are properties considered more mortgageable than grade 1,
Grade II are “buildings that are of special interest, warranting every effort to preserve them”. These are the most common, with 92% of listed buildings falling under this category. Though more common, even grade two listed buildings require a level of maintenance which can be higher than a standard property.
You can find out if a property is listed - and to what extent - on the planning section of your local council’s website.
How does property grade listing affect mortgage approval?
Some lenders flat decline any listed property.
Some are happy with grade 2
Some are happy with grade 2*
Others are happy with grade 1.
Maximum loan to value on listed property mortgages
Based on the increased risks of lending to these types of property, some lenders will cap the maximum loan to value (LTV) they’ll lend, to say 75 or 80%, others happy to lend up to 90-95%. The lower the grade, the more likely it is the lender will cap the LTV.
Maximum term on listed property mortgages
Some lenders will be happy to lend on the property but cap the loan term say to 20 or 25 years, to reduce their exposure to risk on the property degrading in condition over longer periods. The lower the grade, the more likely it is a lender can cap the term.
Look out for restrictions on the property
Some lenders will consider any restrictions on the property very carefully. If too onerous, they may decline the application altogether. Restrictive covenants on property titles should be declared by the vendor before sale and will certainly come up on conveyancer searches.
Insuring the listed property for mortgage purposes
It will be terms of any mortgage contract for the owner to have buildings insurance in place. Some listed properties will be expensive or very difficult to insure, given their age and characteristics. Also, maintaining the property in current form would be linked to its value so in the event of total loss, the property may not be able to be restored to the market value it once had.
It may be an idea to get the property approved for insurance before you buy, or in the very least get a firm quote. You never know, the premiums might put you off buying in the first place!
Valuers’ comments about listed property impacting the mortgage
Lenders, even those who accept listed properties, will often state that “valuer comments” are how they decide whether the property is suitable security or not. For this reason, finding a lender that you know accepts listed property is key, but bear in mind that it may still cost you the valuation fee to find out for sure if they’ll lend.
Some lenders don’t charge valuation fees on purchases, so it may be worth starting there.
Mortgages on listed property across the UK
The grading system for a listed building differs depending on where in the UK the building is. For example, Scotland and Northern Island grade their listed buildings differently compared to England and Wales.
Listed status England and Wales
Grade I - Buildings of outstanding or national architectural or historic interest.
Grade II* - Particularly significant buildings of more than local interest.
Grade II - Buildings of special historic or architectural interest.
Listed status Scotland
Category A - Buildings of national or international importance, either architectural or historic; or fine, little-altered examples of some particular period, style or building type.
Category B - Buildings of regional or more than local importance, or major examples of some particular period, style or building type, which may have been altered.
Category C - Buildings of local importance, lesser examples of any period, style or building type, as originally constructed or moderately altered, and simple, traditional buildings that group well with other listed houses.
Using a similar system to Scotland, Northern Ireland’s listed buildings are graded A, B+, B1 and B2.
Do I need a larger deposit for a listed building mortgage?
We are often asked whether a larger deposit is needed because of the risks associated with purchasing a listed property, and with some lenders that may be the case.
Typically, larger banks and building societies have stricter and less flexible policies when it comes to their criteria for listed building mortgages. However, there are some lenders who will consider mortgages for Grade One properties at a 95% loan to value, subject to a valuer’s comments.
If you’re set on buying a listed property, but are struggling to find a willing lender, then it’s advisable to speak a mortgage advisors, who will be able to scour the market to find the best possible solution and mortgage to suit you, in fact the advisors we work with have access to whole market mortgage brokers who specialise in this area.
Can adverse credit affect my listed building mortgage application?
We have helped many homeowners who have worried that adverse credit will affect their chances of being approved for a mortgage, especially in cases of applying for a listed property which is deemed as a higher risk for a lender.
Adverse credit is a term used to describe a less-than-perfect record of repaying credit commitments. Depending on your circumstances, it is possible to mortgage a listed property even if you’ve had bad credit, which may be:
Debt management plans
Or a combination of them all
Furthermore, whether or not you have ‘bad’ credit is subjective because each lender has a different set of criteria that they use to calculate and assess someone’s risk and ability to repay their mortgage.
Therefore, one lender may approve you while another rejects you, regardless of any ‘bad’ credit you may have.
If you have bad credit, depending on the type and how recent it was, lenders can require more deposit and/or charge a higher fee or rate of interest.
That said, some specialist lenders currently offer incredibly competitive rates and will consider as little as 5% deposit, even for someone who has had credit issues in the past. The more recent or severe the issue, when getting a mortgage on a listed building, is likely to mean you’ll need more deposit.
Are there restrictions when buying a listed property?
If you are considering getting a mortgage for a listed building, there are some things to consider before hand.
For example, did you know that there are self-build companies who will look more favourably on a mortgage application if the person applying is planning to convert the property into a residential building?
This, amongst other factors and restrictions, are things you should take into considertion before buying a listed property.
Gaining consent from your local authority
If you plan to do work to a listed property you will need to apply for consent from the local authority; this is the case even for something as simple as putting up a satellite dish, changing the windows or having new doors fitted.
Councils can be very strict with alterations so before you apply for a mortgage for a listed building, find out what you can and can’t change.
Any work that is taken out without appropriate consent, is deemed as a criminal offence, so failure to obtain permission can cause a lot of problems for a new homeowner.
If the property has a feature that is specifically mentioned in the official listing document, it can be very difficult to amend or demolish it, so check this very carefully with your council.
The best approach is to buy a listed building because of its special characteristics, not despite them.
The cost of repairs and maintenance on a listed building
Listed buildings can require far more maintenance than a modern home, and so you’ll need to budget for this.
When seeking a mortgage on a grade 2 listed building, lenders will need to know that you can afford future maintenance including replacing and upkeeping thatched roofs, windows, gutters and drains.
They will also place importance on your financial ability to upkeep historical features of the property, which can be costly because ‘off-the-shelf’ doors and windows are unlikely to be accepted by the local planning authority.
Furthermore, restoring original features can require a specialist tradesman, which can add another layer of expense.
Because of this, lenders will consider your income, job security and other financial factors when considering whether to approve your mortgage.
Finding the right surveyor
The wrong surveyor can give poor, inappropriate or very costly advice, which can cause the lender to decline the mortgage, so research is the key. Try to find a building surveyor who specialises in historic buildings as they will have the expertise to guide you through the process.
Once you’re happy with the property and are ready for the full mortgage application (or you may wish to pay for your own valuation as part of the mortgage application), a lender will want to value it.
This is where picking the right lender is so important, because they will panel the valuation out to a specific surveyor, and if they don’t understand the property or the market, their comments could cause a decline where another lender would accept.
Check on past work
Have any works been carried out by previous owners on or within the graded property and, more importantly, were they authorised? This is important because you may be stuck with the bill for rectifying unapproved work or modifications.
Ensure you check that the appropriate listed building consent has been gained before applying for a mortgage and putting in an offer to avoid inheriting any planning issues.
If the property does not correspond exactly with the plans on the consents, you, as the new owner, will be the one liable to correct any mistakes.
Should I seek professional advice before applying for a listed building mortgage?
We always recommend you seek advice from a mortgage advisor before applying.
They will be able to research the best lenders based on your financial history, personal circumstances, income and their own industry knowledge of what lenders will and won’t accept.
It can also take a lot of time and stress out of the process, as it will save you having to compare numerous options that might not be available to you, allowing you to focus on the ones that are.
What the next steps if I want to apply for a mortgage?
If you’re considering applying for a listed building mortgage, there are a range of lenders who will consider your application and also help you through the process of buying a more unconventional property.
The specialist advisors we work with will understand your situation and already know which lenders to go to, and will give you the right advice on the right mortgage for you.
Just because you have been disregarded by a certain lender for a listed building mortgage because of your financial or personal circumstances, it doesn’t necessarily mean you will face further rejection from another.
Speak to a listed property mortgage advisor today
If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.
Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.
*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA.Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes.
The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
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