Non Standard Construction Buy to Let
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Non Standard Construction Buy to Let
Anthony McQuilliam explains how Buy to Let mortgages work on non-standard construction properties.
Podcast approved by The Openwork Partnership on 04/12/2024
Can you get a Buy to Let mortgage on non-standard construction? Is it harder to do this?
You could still get a mortgage on a non-standard construction property, but there could be a few hurdles to overcome. Not all lenders accept a non-standard construction property as a Buy to Let.
Some lenders see that kind of property as harder to resell in future, and also having more potential for defects. Other lenders have quite flexible criteria around non-standard construction. It is all down to the valuer’s comments when they go and view the property.
What lending criteria do I need to meet for a Buy to Let mortgage on a non-standard construction property?
The actual criteria for most Buy to Let lenders on a non-standard construction property are very similar to standard construction. They still want to make sure that the rental income stacks up, that you have good credit and you’ve got some form of income.
The main difference is that if the lender only wants standard construction properties, they may decline the application.
You just need to make sure you tell your broker what kind of property you’re purchasing. If it is non-standard construction, we could do the research and speak to the lender prior to submitting an application, to increase the chances of the mortgage being approved.
Can you get a Buy to Let mortgage on all types of non-standard construction properties?
It depends on the lender you’re speaking to. Some are very flexible and lend on the majority of properties, but you may have to pay a higher interest rate because of that.
It all comes down to resalability. If they think they would struggle to sell the property in the future, or it has a high chance of defects, the lenders want to protect themselves from that risk.
In theory, they should be able to lend on most properties. However, once they actually go out and value the property, if they could see defects or potential issues or that they may not resell it, they may kick the mortgage application back.
What deposit is needed for a Buy to Let mortgage on non-standard construction?
It’s a big question with Buy to Let because that is the biggest hurdle. Once you’ve got your deposit, the rest becomes a bit easier. The vast majority of lenders want a 25% deposit on a Buy to Let mortgage.
But it could be that the type of property means you have to go with a lender that will only allow a mortgage of 70% Loan to Value, in which case you will need a bit more. The general rule is that 25% is absolutely fine.
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What other costs are involved here? Is Buy to Let on non-standard construction properties more expensive?
It could be more expensive, but it doesn’t have to be. Lenders’ rates change on a daily basis – if you’re applying for a mortgage and non-standard construction mortgage rates are extremely high at that point, you will end up paying more.
There aren’t any extra fees involved. It’s the same for buying a standard construction Buy to Let property. You’d need to save up your deposit, pay solicitors fees and stamp duty, and you’d also need to save up for your broker fee and valuation.
Can I still get a Buy to Let mortgage on a non-standard construction property with bad credit?
Yes. Some of the lenders for non-standard construction properties are also happy to lend to people with bad credit. You may have a higher interest rate and the product fees may be more expensive, but there are still lenders that will be more than happy if you’ve got bad credit and it is a non-standard construction property.
Can I get a Buy to Let mortgage on a non-standard construction property if I’m a first-time landlord?
Yes. If you’re a first-time landlord and you want to buy a non-standard construction property, it is still doable. Again, it limits the available options, but quite a few lenders will be happy to do that.
Are there any restrictions on renting out a non-standard construction property? What are the pros and cons here?
Once you’ve got the mortgage agreed for the property, there are no restrictions at all as to who you could rent it to. It is down to you who becomes your tenant. Unless the property’s falling down, of course – you’ve got duty of care as a landlord to make sure the property’s safe.
How does remortgaging a Buy to Let non-standard construction property work? Any differences in that process?
No, so it’s the same as a standard Buy to Let property. You’d have to start looking into that about six months beforehand, to give yourself time to choose the most appropriate lender and make sure everything’s ready.
Then, once the current deal finishes, if you want to raise additional funds they will be there on that day. Getting it all prepared will mean you don’t need to worry about going on the lender’s standard variable rate because you’ve locked in nice and early.
How does the application process work? Any differences on a Buy to Let mortgage for a non-standard construction property?
No, not at all. The only real difference is that you need to make sure your broker is fully aware of the kind of property you’re purchasing. Have that conversation before submitting a mortgage application – otherwise you could spend hundreds or thousands of pounds on valuation fees, broker fees and solicitors for a property you can’t get over the line, because it’s the wrong lender.
How can a mortgage broker help here? Is there anything else we need to know?
It’s the same with all mortgage applications. Preparation is the key to success. Long before you look for a Buy to Let property, have a conversation with your broker. We could sit down and go through what the rental income might be and current mortgage rates at the time.
Make sure you’ve got the deposit and the fees available. Also, have that conversation up front if you’re going after a non-standard construction property, because it may be slightly harder to get the mortgage. It could also potentially affect future resalability. The advantage, however, is that you tend to get a bigger property for a better price.
If you’re restricted on budget, it’s worth having that conversation with a broker far in advance – then we could do the research and let you know what lenders would accept that property. We’ll also explain any difference in the rates compared to a standard construction property.
MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Approved by The Openwork Partnership on 04/12/2024.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
