The Private Finance Guide To Country House Mortgages
Crisp, clean, country air; pastoral views that roll up and over the horizon; a sustained stream of birdsong to accompany your every moment – this bucolic imagery is one of the many reasons people consider purchasing a property in the country. And in the wake of the Covid-19 pandemic, more space, both outside and inside, especially for working from home, has become an urgent requirement for many buyers.
What many people don’t realise however, is that the challenges involved in obtaining a mortgage for such a property are often considerably different to those involved in obtaining a standard mortgage in an urban area. Would-be buyers frequently approach their existing mortgage providers with the assumption that they’ll be eligible for the same kind of loan as that which they’ve been able to secure on their existing, urban property, only to find that their application has been rejected because their desired country property fails to satisfy any number of their lender’s criteria.
Throughout this guide, we will walk through the various factors that impact the likelihood of borrowers having their country property mortgage applications accepted. We hope to show that while country properties often pose a unique range of mortgage-related difficulties, there are almost always lenders that are willing to lend on such properties. The greatest challenge prospective buyers face, therefore, is locating such lenders – this is where we come in…
Annexes/Separate Living Units
Many country properties come with annexes or separate living units. Such amenities may present certain difficulties when it comes to obtaining a mortgage, because lenders fear that borrowers will let these spaces out and that, should they ever need to take possession of the property, they will be unable to evict the tenants currently occupying these spaces. There are, however, a number of lenders that are willing to consider mortgage applications for properties with annexes and separate living units, providing borrowers confirm it is for personal use. Many lenders will state that this is down to the valuer, however a broker’s knowledge of previous cases and ability to speak directly to underwriters can save the delays and costs this would otherwise incur.
In the past, mortgage lenders were averse to all kinds of short-term letting and often declined mortgage applications if such an intention was articulated by the applicant. With the rising popularity of AirBnb country breaks, however, a growing number of lenders are beginning to update their lending policies to better accommodate this market trend. If you’re looking to buy a country property which you intend to let out via AirBnB, you shouldn’t be surprised if certain mainstream lenders show a reluctance to lend on such a property.
Types of Construction
Country properties are often older than their urban equivalents. This can mean that they were constructed using different methods and materials than modern homes and therefore that they fall under the category of ‘non-standard’ properties. Lenders are often reluctant to lend on such ‘non-standard’ properties because they regard them as higher risk than properties of ‘standard’ construction. There are, however, a number of specialist lenders with appetites for certain types of ‘non-standard’ properties. This means that it is very often possible to secure mortgages for these properties; the key is knowing which lenders are willing to lend on which kind of property.
Local Commercial Interest
Owners of country properties with lots of land and numerous outhouses often choose to let out part of their property, perhaps renting stables and garages to mechanics and equestrian businesses. As with annexes and separate living units, many lenders are unwilling to offer residential loans on such properties in the fear that the property-owner will let out these amenities and that, in the event that they need to retake possession of the property, the lender will be unable to evict the tenants.
Ancient Rights of Way And Footpaths
Country properties are far more likely than their urban counterparts to have ancient rights of way running through their grounds. Many lenders are categorically unwilling to lend on such properties because they feel that the right of way will significantly damage the resale value of the property.
Country properties with lots of land sometimes come with overage clauses. An overage clause is a provision in a sale contract that provides the means through which the vendor may be entitled to receive further monies after the completion of the sale if a specified condition is satisfied. Many lenders are unwilling to lend on such properties because they regard the overage as a restrictive covenant that may harm the resale value of the property in the future. But there are ways around this. Some niche lenders, for example, may be willing to offer a mortgage on such a property in certain circumstances. Additionally, if the buyer has enough capital, it may be possible for them to parcel the property’s land up, and then to purchase the part of the land to which the overage clause applies outright. They should then be able to secure a higher loan-to-value (LTV) mortgage on the part of the property on which there is no overage clause.
Lenders are often unwilling to lend on properties built on unregistered land, because they fear that someone other than the property developer will have a more legitimate claim to the land than the buyer. There is, however, a way around this. If borrowers take out indemnity insurance, they and the lender will be covered for the life of the property in the event that someone with a better claim does come forward. This measure is usually sufficient to assuage the anxiety of the lender and ensure the acceptance of the mortgage application.
Listed buildings often come with very specific guidelines about what kind of construction work can and can’t be done to preserve them. This presents an issue, because many lenders fear that the state of the property will decline, and that, unable to make the necessary repairs, the resale value of the property will be significantly reduced. It can therefore be extremely difficult to secure mortgages on such properties, though there are options available in certain circumstances.
Some country properties come with agricultural ties which often stipulate that whoever is occupying the property must be employed locally in agriculture. Since this restriction is likely to severely limit the number of potential buyers in the event of a future resale, many lenders are unwilling to lend on properties where such a stipulation is in place.
Amount of Land
It may surprise some people to find out that certain lenders are unwilling to lend on properties that come with more than a set amount of land. These land limits vary from lender to lender: some set their land limit so low that they are unwilling to offer mortgages on properties with more than two acres of land attached. This is not a restriction that often poses a difficulty to the acquisition of urban property mortgages, because such properties rarely, if ever, have land attached to them that exceeds the maximum amount stipulated by lenders. Country properties, on the other hand, frequently come with large amounts of land, which may mean that borrowers are forced to approach specialist lenders who have more of an appetite for large amounts of land to complete their purchase.
All too often, our clients rush headlong into a property purchase, riding high on the anticipation and excitement that invariably accompany such an experience, only to find, months down the line, with no forewarning from their estate agent, that some feature of the property presents serious finance-related difficulties. While many of these obstacles are perfectly surmountable with the help of a good broker, they can still cause a good deal of unnecessary hassle and severely slow down the house-buying process. Before purchasing a country property, it is therefore extremely important that would-be buyers challenge their estate agents to come forward with all of the information that may pose difficulties to the transaction in the future. They can then enlist the services of brokers, solicitors, and surveyors earlier on in the process in order to better understand the dimensions of these issues and begin developing solutions to these problems right from the outset.
As has just been shown, there are a range of finance-related difficulties that apply uniquely to country properties. What must be emphasised, however, is that these problems are, in the vast majority of cases, solvable. We frequently encounter individuals who have had their mortgage applications rejected by mainstream lenders because their desired country property failed to satisfy some criteria or other. Perhaps there’s too much land involved in the purchase or the property’s been constructed using outmoded methods. Regardless of the specifics, it is very frequently the case that such an individual can, in fact, secure a mortgage on the property they desire, despite facing rejection from their existing lender. It is in instances such as this that the input of a broker is absolutely invaluable; it is often the difference between the sale going through and the sale failing to get off of the ground.
If you are looking to purchase a country property and would like to discuss the range of mortgage options available to you and the property you’re looking to buy, you can arrange an obligation-free consultation with one of our advisors by calling us on 0800 980 8777 or by emailing us at email@example.com.
You can also read a recent case study here of a couple we assisted in purchasing their dream country home, who had previously been rejected for a mortgage on the property on account of the numerous complexities involved…
Your home may be repossessed if you do not keep up with repayments on your mortgage.