Self-build mortgage enables purchase of an uninhabitable home at 80% LTV

Our client’s background

Our client, aged 48, a partner in a large Limited Liability Partnership (LLP) with a strong history of earnings, had found a perfect home for £590,000. There was one significant obstacle. The property’s condition meant it was deemed unsuitable as a lending security by traditional lenders, complicating the financing process. The property required significant renovation.

Initial challenges non-standard property

The property had already been declined by a high-street lender due to its condition, classifying it as non-standard and challenging to finance. Additionally, the client needed a solution that would allow them to retain their current home while purchasing and renovating the new one.

This scenario required creative financial structuring and a high loan-to-value (LTV) to cover renovation costs and work around a limited cash deposit, all while keeping the existing residence.

How our mortgage solution solved the problem

Recognising the unique demands of this project, Private Finance negotiated a bespoke mortgage strategy. We chose a self-build mortgage lender, facilitating the funding for both purchase and subsequent renovations. This type of mortgage was ideal due to its flexibility in dealing with properties that are initially considered uninhabitable.

A pivotal aspect of our solution was securing a high LTV of 80%, which is quite challenging under normal circumstances for properties needing significant work. We negotiated with the lender who, convinced by the client’s financial stability and the potential of the property post-renovation, agreed to offer the loan under their standard mortgage range despite the initial reservations.

The integration of the client’s income and the strategic disregard of a background mortgage for affordability calculations were critical in structuring this mortgage solution. This approach ensured the client could embark on their project without needing to sell their existing home, providing much-needed liquidity and stability.

The cherry on top: We were able to secure our client a standard mortgage product at rates lower than the self build range, but with the enhanced underwriting that ensured the client got the desired mortgage amount. Additionally, the lender ended up being so comfortable with the level of works.

Key takeaways

For those considering similar property investments, our recommendations include:

1. Explore non-traditional financing options: Don’t be deterred by initial rejections from high street lenders. Products like self-build mortgages can be adaptable solutions for complex scenarios.
2. Assess the full potential of the property: Thoroughly evaluate how renovations could increase property value and explore financial products that accommodate this.
3. Ensure financial cushioning: When taking on significant renovations, ensure your financial setup allows room for unforeseen expenses.

If this scenario resonates with you or you’re seeking personalised mortgage advice for another situation, please get in touch — we’d be happy to see how we can help. Call us on 0800 980 8777 or email info@privatefinance.co.uk.