A property finance consultancy claims that unmortgageable properties can be snapped up with a discount of 27 per cent.

Apex Bridging says the latest data shows that the average price of an unmortgageable home in England is £215,391. This marks a saving of £80,493, or 27.2 per cent compared to the wider national average house price of £295,884. 

The biggest discount can be found in London where unmortgageable homes come with a saving of 33.8 per cent which, given high house prices in the capital, is also equivalent to the nation’s largest cash saving of £190,556. 

In the South East, the unmortgageable saving is 27.5 per cent, followed by the East of England, East Midlands and the North West, all 25 per cent or more.

What makes a home unmortgageable?

– Structural problems: Severe structural issues such as subsidence and widespread damp can render a building unsafe for habitation. Lenders will therefore view it as being unsuitable for financing. Non-standard construction methods and materials can also be an issue because lenders can’t be confident that the methods are safe in the immediate and long-term, so the loan is considered too risky.

– Legal issues or complexities: A number of legal complexities can render a home unmortgageable. For example, if the property has a short lease of less than 70 years, lenders can be nervous to give finance due to the value that the property will lose as the lease gets closer and closer to its end.  Defective titles that cause confusion around the identity of the legal owner can be an issue, as can any changes or modifications made to the property without the required legal consent, such as planning permission. 

– Location-based and environmental issues: Properties located in areas prone to environmental hazards such as flooding can be considered too high risk to mortgage. Other issues can include the notorious Japanese knotweed and risk of subsidence, while other location-based issues will arise if the home has no immediate access to water and electricity, while mortgages can also be hard to come by if there is no discernible road giving access to the property.

How to buy an unmortgageable property

With a mortgage off the table, unmortgageable properties are often accessible only to cash buyers who are able to bypass the lending process entirely. But there is another way of buying an unmortgageable home that suddenly opens the door to buyers of all kinds – a bridging loan. 

Using a bridging loan, which is a short-term loan designed to bridge the gap between necessary expenditure and the return on that investment – buyers can purchase an unmortgageable property, spend the time and money required to bring it up to standard which means it will be accepted for a mortgage, and then use some of the funds generated by the mortgage to pay off the bridging loan. 

Alternatively, if the property is being purchased as an investment, a process known colloquially as ‘flipping’, may be the route that the investor looks to take. The bridging loan enables the purchase and renovation, before being paid off by the funds generated by a quick sale, Again the works would bring the property to a mortgageable standard which in turn makes the property more appealing to a larger pool of potential buyers.