Mortgaging a Flat!
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When mortgaging a flat, you may come across a few difficulties.
Things such as the flat being located next to or above a commercial property, not enough years left on the lease, having shared access to part of the property e.g. a balcony or even just the extra or unknown cost that owning a flat comes with e.g. ground rent or service charges. Within this post, we will be talking about the main issues which may cause you some hassle when applying for a mortgage on a flat.
Commercial properties can cause many an issue for buying and selling. The property represents the security for the mortgage, so a lender will need to be sure that if they ever needed to repossess the property, they would be able to sell it to regain the outstanding debt.
Commercial activities carried out are usually likely to cause a nuisance by noise, smell or unsocial hours. Also, if the flat does not have its own self-contained entrance, meaning you must enter via the business premises, this could also majorly dent the chances of being accepted, therefore many lenders may not be prepared to grant you the money.
Ultimately, the lender's final decision will rely on the independent valuation, this is where you will find out whether it is unsuitable for mortgage purposes or if any concerns have been raised about its future saleability.
Shared access, much like the commercial properties, can cause issues. Lenders don’t like you and somebody else having shared access because it will undoubtedly cause problems if you don’t know who has rightful ownership of the land.
When buying a property, it is important to know whether it’s a freehold or a leasehold as this will influence the type of mortgage you are eligible for. Leasehold is the method of owning the property but not the land on which it stands and then when the lease expires, ownership of the property reverts to the freeholder.
A property with a lease of under 75 years can be difficult to mortgage and sell, the reason for this is because the lease becomes more expensive to renew. So, at the end of your mortgage term, it would be ideal to have at least 50 years remaining on the lease. There are options as to what you can do when it comes to your lease, for example, you can extend your lease but there will be costs attached to this.
On top of paying for your mortgage, there are other charges in question when it comes to buying a flat so you will need to make sure that you factor these extra costs into your budget. Costs that come with the flat include service charges and ground rent. For what you pay you receive general maintenance if minor things go wrong. Although you must be aware that this might not cover major repairs e.g. a new roof.
Finally, get insurance! You’ll need to have building insurance to cover any costs of repairs if something happened to your home and life insurance alongside your mortgage because you never know when the worst is going to happen. Securing your assets for the sake of your family has never been more crucial. God forbid the worst happened, your insurance will cover the cost of your mortgage.
Here at Active Brokers, we are here to assist you and the team is ready to answer all your questions. Quick, simple and efficient, don’t struggle alone, contact us!
If you have any questions then please get in touch which can be done through https://activebrokers.co.uk/ Or through social media on Facebook, Instagram, Twitter or Youtube.
- This does not constitute advice, it is for information purposes only.
- You should contact a mortgage broker for personalized advice for your specific circumstances. Please ask us for a personalized illustration.
- A fee of up to 2% of the mortgage amount is payable. The precise amount will depend on your circumstances. A typical example would be £995.00 payable on application and the remainder payable on mortgage offer. We will also be paid commission from the lender.
- Limited is authorized and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://www.fca.org.uk/register) under reference 488342.
- Your home may be repossessed if you do not keep up repayments on your mortgage.