Construction Mortgages on Non-Standard Developments
Development finance can be a different prospect from a commercial mortgage, especially if your development plans don't fall within the generic criteria. Here we explain how construction mortgages work and how your choice of lender could make all the difference.
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Based on your yearly income,
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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.
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Construction Mortgages on Non-Standard Developments
In the construction sector, a vast number of developments might be considered non-standard. That description covers any property built from anything other than traditional bricks and mortar.
For example, a mortgage lender might consider a thatched cottage, a timber-framed eco-home and a high-rise apartment block all to be non-standard.
Here we'll explore what non-standard covers in terms of construction mortgages, and everything you need to do before applying for mortgage lending. For more assistance with mortgaging a non-traditional construction project, contact Revolution Brokers on 0330 304 3040, or drop us a message to [email protected].
What Developments are Classified as Non-Standard for a Construction Mortgage?
Any development made from any materials aside from bricks and mortar is usually deemed non-standard from a mortgage lender's perspective. That includes:
- Single brick properties.
- Timber or steel frames.
- Listed buildings.
- Cottages with thatched roofs.
- High-rise flats.
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Are There Mortgages Available for Unusual Development Projects?
Generally, anything non-standard is deemed a higher risk, so the criteria will often be stricter than for more typical developments.
There are many factors to consider before starting the application process:
- Long-term maintenance costs - for example, specialist maintenance or treatments. As an example, a thatched roof will need replacing periodically. Lenders will consider such costs when evaluating the value of a construction.
- Potential to convert - sometimes conversions are available to swap out non-standard materials with more traditional ones, improve structural integrity, and make a property less risky. However, using a certified repair scheme can be costly.
- Resale value - lenders will also assess the likelihood of the property retaining or growing in value. A non-standard property is usually harder to sell.
- Insurance - policies for unusual properties are not always available from mainstream insurers, and are typically more expensive.
- Valuation reports - the conveyancer or surveyor inspecting the property will provide a commentary, which becomes more critical in a non-standard mortgage application.
In many cases, the lender will need more extensive surveys, such as Listed Building Survey reports, inspections for asbestos, and structural surveys to assess the building's long-term structural integrity.
How are Construction Mortgages Different Between Standard and Non-Standard Developments?
The mortgage product itself isn't much different, but the terms offered might be less competitive. That means needing a higher deposit, paying more expensive interest rates, and needing to meet the affordability requirements closely.
Lenders all have a different attitude to non-standard properties, and while niche lenders can often offer the most competitive terms, you can find this type of lending from some well-known banks:
- Halifax might offer a mortgage, although will usually not lend against frame cavity constructions or homes built from pre-cast concrete.
- Nationwide will reject applications on properties outside of London taller than five storeys.
- Santander may lend against steel frames and will mortgage ex-council properties without any height restrictions.
Other lenders include Barclays, HSBC, NatWest and TSB.
Are There Non-Standard Construction Mortgages in Scotland?
There are, yes, although there are fewer lenders than in Wales and England.
You may also find postcode restrictions, so it can be challenging to mortgage a non-typical property in the Highlands.
Credit check requirements can also add another layer of complexity. Therefore, consulting a broker is vital before beginning your application, as you'll need a provider with a certain degree of flexibility around their eligibility criteria.
Expert Help with Non-Standard Construction Property Mortgages
If you're unsure whether your house purchase falls into the non-standard category, or would like help mortgaging a particularly unusual home, it is essential to use a broker.
Some lenders will refuse to lend against any non-standard property types, so this can make a significant difference and protect your credit file from racking up credit checks.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.