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The lender says ‘No’

THE QUESTION

I made an offer for a property that will be my first BTL.  It was accepted and the surveyor went round, Now the surveyor has said kitchen is not up to scratch so the value of house is zero.

The house needs some work, which I was going to do before letting, I am a builder, so I know what needs doing and have the skills to do it.  I just wanted to do it and get the property rented out asap.

Now I’m a bit stuck as the mortgage company won’t lend on it because of its current problems, any ideas?

THE ANSWER

You made the common mistake that costs investors many hundreds of pounds in wasted valuation fees, thinking that as long as a property is functional it is mortgageable. 

While that is correct for a property that you intend to live in yourself, it does not apply in the same way for a property that you expect someone to pay you money to live in. 

For BTL mortgages, the functional bar is raised to desirable i.e. would a tenant pay several hundred pounds (or more) a month to live in this as it is?

Valuations are an opinion-based exercise, albeit by someone with professional qualifications in the art. So borderline properties may pass with some valuers and fail with others.

What you have here is an unmortgageable property for BTL purposes. The lesson here is that BTL mortgages are primarily based on the property being day one rentable, with some tolerance for minor improvements. Properties requiring more substantial improvement will fail to get a mortgage.

Your Options 

  1. Give up and walk away. but take the learning with you and reassess how you want to invest and the condition of any future property you intend to buy, so you don’t make the same mistake again.
  2. Abandon this lender and chance your arm with a different lender, hoping their valuer will pass it as mortgageable – but - you may well waste another valuation fee to get the same result
  3. Learn to buy ready-to-rent properties if you want to get a BTL mortgage on them
  4. if you want to persist with dilapidated properties that are not mortgageable and don’t have a stash of cash to buy outright - acquaint yourself with how bridging finance works and what it costs, as this is the primary source of finance used to purchase unmortgageable properties
  5. Try to get the sellers permission before completion and do the required work to make it mortgageable. Note - most sellers will not agree to this and their solicitor will advise them against it even if they are agreeable.

Being a builder, it makes sense for you to buy dilapidated properties - especially ones with structural defects that you know how to fix. Then improve them to add exponential value and refinance to pull out your cash.

If you really want to leverage your investment you will find bridging will make you more profit than any of the other approaches.

You can learn more here:

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