Buying

Unusual homes

Mortgages for unusual homes

In this page
                    Insurance
                   The value of advice
                   Self Build
                   Go green

It may not be easy to get a mortgage for an unusual property, but as more weird and wonderful homes appear on the market, mortgage lenders will try their best to accommodate you.

Fancy living in a boat moored on the Thames, in a semi-converted lighthouse or in the penthouse of a tall apartment block? Then start talking to lenders sooner rather than later, say experts, because the more unusual the property, the harder it could be to finance it.

But buying something just a little out of the ordinary can be easier than you think. Old mills, tithe barns, old oast houses, converted fire stations – all are projects the Halifax has provided mortgages for, says spokesman Paul Fincham.
And as deputy prime minister John Prescott announces plans to build on more brownfield sites, the trend to buy and convert unusual properties is set to grow.

“ If you’re looking for something unusual, you should approach your lender in the usual way and get an agreement in place,” says Fincham. “From a lender’s perspective, we look very carefully at the valuer’s report and at issues like resaleability.” Lenders will also look at the quality of a conversion, he warns – or if you plan to convert it yourself, will consider releasing money in stages.

“ But check that you’re not looking at the place through rose-tinted spectacles,” Fincham adds. “An unusual property could need an unusual level of care: old schoolhouses, for instance, might have huge windows, or old churches could have valuable glass that needs maintaining.”

Insurance
Insurance costs could be high too – most cut-price insurers start with the basic question: “Is the property of conventional construction?” and “Are the roofs made of tile and slate?” Unusual properties can be hard to insure, and – in the case of barns, old coach houses or mills – may need large amounts of work to make them fit for human habitation. And like many mainstream lenders, the Halifax will not lend on anything on the water or on wheels, Fincham adds.

Some lenders are quite literally afraid of heights, warns Melanie Bien, associate director of Savills Private Finance. “Some lenders won’t look at the top floors of high-rise properties, for instance,” she says. “For lenders, risk is the main thing. So lenders will look very closely at a valuer’s report.

“ For a listed building or something very unusual, you might need a specialist survey carried out by somebody who really understands that type of property. And some very unusual buildings are in a poor state of repair. So lenders might release the money in stages, and get someone to check before they release any more,” says Bien.

The value of advice
Use a broker to find the right lender for you, Bien advises. Choose a boat as your dream home, for instance, and you could have serious difficulties finding a lender: “You probably need a lender with a marine finance arm, such as Barclays. But even so, that could mean a premium on the rate, a bigger deposit and a shorter term.”

Lenders are understandably put off by the prospect of borrowers simply sailing off in their newly acquired prop-erty – and to finance homes in converted railway carriages, say, lenders generally want them to have been immobilised, says Bien.

Self-build
But if you want to think – or live – outside the box, then there are still plenty of options. The self-build market is going from strength to strength, say experts – 25 per cent of all new detached houses are now self-built. So if you want extra bathrooms, an unusual layout or even a basement playroom, then building it yourself is an option.

Many property owners use self-build to convert the property they want, and employ a team of builders, which means never getting their hands dirty. “There is typically a 25-35 per cent increase in equity if you do it yourself,” says John Hay, spokesman for Buildstore. “So a lot of people use self-build as a way of leapfrogging one or two stages up the housing ladder.”

How does it work? Buildstore works with five mainstream lenders to offer a mortgage where payments are made in stages, and in advance – when you need to do the work – instead of in arrears, as most lenders would offer. “Self-build mortgages have developed a lot in the last five years,” says Hay, “and so there’s no need to live in a caravan in the meantime. Customers can now stay in their own homes while the work is done.”

You can now borrow up to 95 per cent of the cost of the property through the Buildstore deal, adds Hay, and can borrow on land with outline planning permission or on an unusual property you want to renovate.

Go green
And thinking outside the box is positively encouraged by lender Norwich & Peterborough building society, which even gives an annual award for the best green self-build. “We treat mortgage applications for self-build properties in exactly the same way as any other application,” says spokesperson Alison Rolls. That means that the full range of N&P products is available on the same terms.

To create an environmentally friendly home, many borrowers are now looking to the Ecology Building Society. “For many mainstream lenders, this is unfamiliar territory because they don’t know what photovoltaic panels or composting toilets are,” says marketing manager Jenny Barton. “But people building green properties typically want a green lender as well.”

Financing an unusual home is becoming easier all the time, and your home can stand out and help save the planet too.

ARTICLE TAKEN FROM ‘WHAT MORTGAGE’ MAGAZINE - February 2006