How To Get a Loan for an Unmortgageable House

02-April-2024 16:21
in Mortgage
by Jennifer Stevenson
How to get a loan for an unmortgageable house

You can get finance to buy an unmortgageable house - but not necessarily via the traditional 'mortgage' route...

Bargain-hunting property investors love unmortgageable properties. Packed with potential: competing buyers are scared off by the difficulties in securing finance.

But how can you ensure you don’t get caught in the trap – committed to buying a house where you can’t get a mortgage (or only at punitive rates)?

Do you see a potential dream home where others see a leaky barn, an overlooked workshop or a rat-infested, boarded-up terrace?

For entrepreneurial optimists, we flag all the warning signs you need to be aware of, such as whether a property is unmortgageable, and then give you solutions for how to still buy it.

Related: How to Improve Your EPC Rating: The Landlord’s Guide

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What Makes a Property Unmortgageable?

Unmortgageable Auction Properties

  1. Mortgages for Properties with No Kitchen or Bathroom
  2. Properties with Structural Damage
  3. Houses in Close Proximity to Commercial Properties
  4. Low-Value Properties
  5. Short Lease Properties
  6. High-Rise Flats
  7. Ex-Local Authority Housing
  8. Non-Standard Construction Properties
  9. Houses with Environmental Issues

How To Buy an Unmortgageable House

Do You Need a Mortgage or a Bridging Loan?

Why Traditional Lenders Probably Can’t Help You With Renovation Finance 

What is Considered an Unmortgageable House?

It’s derelict!

You know (and mortgage lenders know) what derelict looks like: run-down, empty, boarded up, and not in “habitable condition.” It can’t be lived in… hygienically or safely.

The technical definition of a property “not in habitable condition” is that it’s derelict, not wind and watertight, needs conversion or doesn’t have a working kitchen or bathroom.

Most high street banks and building societies won’t offer mortgages on properties like these.

Unmortgageable Auction Properties

These properties are unmortgageable due to time constraints.

Property auctions are great places to pick up bargains, including deceased estates and derelict and repossessed properties. But you need to pay 10% of the sale price when the hammer falls, and usually the remaining purchase cost within 28 days.

  • It’s often too quick to arrange a standard mortgage, even if the property is considered “mortgageable” and meets the lender’s valuation criteria.
  • Most high-street lenders will say it takes “four to six weeks” to set up a mortgage, but experienced buyers will tell you to allow at least a couple of months to accommodate the special circumstances that seem to crop up in most mortgage applications.
  • Don’t be led astray by assurances of mortgage offers within 48 hours: that’s not a complete application approval.
  • The “auction finance” offered by auction houses will be bridging finance, secured loans, or possibly buy to let mortgages, not necessarily at the most competitive market rates.

An experienced property finance broker can arrange competitive bridging finance for you for an auction purchase.

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Properties with No Kitchen or Bathroom

While renovating, you may be happy to make do with a camping toilet and Primus stove, but a mortgage lender won’t be so willing to compromise.

The lack of a proper working bathroom or hygienic kitchen renders a property technically uninhabitable – and therefore unmortgageable.

The same goes for a new-build property that’s come onto the market as a forced sale because the developer has run out of finance if it doesn’t have a finished, usable kitchen.

Related: How to Secure a Mortgage for a Property Without a KitchenHow much value can a new kitchen add to my house? 

An extra kitchen!?

Conversely, too many kitchens can be a red flag to mortgage lenders.

A property with more than one kitchen (like Ed ‘Two Kitchens’ Milliband’s north London house) may signal to a mortgagor that you intend to subdivide it into two separate units - a red flag on a standard mortgage application.

Properties with Structural Damage

The signs are usually glaringly obvious: bowed walls, sagging ceilings or door lintels, leaning chimneys, walls separating at the corners, large horizontal cracks…

Rotten joists and subsidence don’t just indicate that you’re looking at heavy renovation rather than light renovation finance.

The costs of these repairs are often hard to estimate, which may mean that mortgagors will be unwilling to lend or that your field of prospective lenders will be severely limited. 

Watch our case study video below of how our clients secured a property at auction with a bridging loan:

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Houses in Close Proximity to Commercial Properties

Flats above commercial premises, houses in streets with pubs, garages or supermarkets…

You might be happy to overlook any shortcomings in a property’s location to buy somewhere affordable.

A mortgage lender will be concerned about the next buyer: will there be enough equally willing buyers to ensure that the property will sell quickly if, for any reason, you default on the mortgage and they need to reclaim their investment?

Low-Value Properties

Ironically, you’ll struggle to get mortgage finance for an absolute rock-bottom bargain property valued at less than £50K. The reason is because the loan size is too small to justify the mortgagor’s administrative work.

How to get a loan for an unmortgageable house

Short Lease Properties

Regarding leasehold properties, anything less than an 80-year lease is considered a “short” lease and considerably devalues a property.

  • Properties with less than 60 years on the lease will be virtually unmortgageable.
  • Anyone who has owned a leasehold property for at least two years is legally entitled to have 90 years added to their lease for a fair market price.
  • (Extending leases with less than 80 years to run is considerably more expensive due to the effect on the property’s value).
  • Purchasing a property with a “short lease”: if the vendor has owned the property for more than two years, they can instigate Section 42 proceedings to start the lease extension process, assigning the benefit to you.
  • Using a bridging loan to finance the purchase, lease extension, and remortgage costs may be feasible, taking advantage of the uplift in the property's value.

In June 2019, the government announced its intention to ban the sale of new buildings as leasehold properties, citing sharply escalating ground rents as a reason for the damage to the resale value of new buildings.

High-Rise Flats

Historically, lenders have been concerned about high-rise flats retaining their value in a downturn. They also voice concerns about maintaining high-rise communal areas out of homeowners’ control.

  • Lenders can be reluctant to grant mortgages on high-rise flats
  • Criteria vary but can range from above the fourth to above the 20th floor
  • The number of surrounding units owned by one landlord

It can be argued there’s possibly a dose of prejudice behind this, associating high-rises with local authority housing. Especially considering the high-spec high-rise developments such as Manchester’s Deansgate, Jackson’s Row, and London’s Diamond Tower and Mapleton Crescent.

Ex-Local Authority Housing

Another housing type that lenders can be reluctant to lend to is some former council houses.

If you have difficulties finding finance, the pool of future buyers who will purchase from you may be equally restricted.

  • Lenders’ criteria may include the concentration of rented local-authority housing in the surrounding area.

Non-Standard Construction Properties

Mortgage lenders like easy-to-sell properties. However, lending for non-standard construction materials and prefabricated construction types can be difficult.

Construction materials which have fallen out of favour include:

  • Concrete (despite the high value of apartments in London’s iconic Barbican complex)
  • Traditional thatched roofs
  • Cornish Units
  • AGM Modular
  • Reema Hollow Panel
  • Woolaway House
  • Tarran Clyde House

Strictly speaking, these properties are usually hard-to-mortgage rather than unmortgageable.

The pool of lenders is more limited, but a well-connected property finance broker should be able to connect you with a lender experienced with your property type.

How to get a loan for an unmortgageable house

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Houses With Environmental Issues

It’s vital to look beyond the walls of the house you want to buy.

The plant life and geology of the property, your neighbours’ properties, and the surrounding area significantly affect whether you may get mortgage finance.

Adverse factors:

  • Invasive Japanese knotweed
  • Subject to flooding or land erosion
  • Near a landfill, waste location or any large-scale excavation

Rental Properties with Low EPC

The government recently introduced new regulations for rental properties with low energy performance certificates (EPC). From December 2025, rental properties will need to have an EPC rating of C or above to take on a new tenancy, and this will then become mandatory for existing tenancies from 2028. 

After 2025, getting a buy-to-let mortgage on a property with a low energy efficiency rating will become difficult. To tackle issues like this, you'll need to refurbish the property to improve its EPC rating to take on new tenants.

See similar: Buy to let EPC loan for landlords

How To Buy an Unmortgageable House 

In short, you'll need a short-term loan (AKA a bridging or development loan) to buy the house before you later refinance with a standard mortgage once you've completed renovation work.

So, is the work required to do a light or heavy renovation?

A light renovation or refurbishment

  • A smaller project where no planning permission is required
  • Building regulations do not apply
  • There’s no change to the nature of the premises (you’re not converting a barn into a house, for example)

 A heavy refurbishment

  • The works will cost more than 15% of the property’s value
  • Structural work is required
  • Planning permission will be needed
  • Building regulations apply

The criteria for light and heavy refurbishments vary from lender to lender. If you’re turned down for a light refurbishment loan, you may need to apply for heavy refurbishment lending, which will entail additional survey fees.

If there’s a chance of this, a good mortgage broker will take your application to a lender who handles both types of lending.

Related: A full guide to your next property renovation

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Do You Need a Mortgage or a Bridging Loan?

Even if it is possible to find a mortgage lender for your house, the rates offered on a dilapidated property will be high, and this may not be the best route to take.

Bridge finance has a reputation for being an expensive, specialist finance tool. But when used appropriately, it can work out cheaper for you. It's also fast and flexible to arrange.

  • If you purchase your property with bridging finance, the ability to “roll up” the interest on the loan (to be repaid at the end) leaves you maximum working capital to fund your renovation.
  • The maximum term on a residential bridging loan is usually 12 months, with no early-exit fees.
  • As soon as you’ve completed the essential works to bring the property up to “mortgageable” standard, you can exit onto a mortgage, taking advantage of the uplift in value of your property to gain a more favourable long-term mortgage rate.
  • A lower LTV gives you access to cheaper borrowing as soon as the work is completed—without paying the early repayment penalty charges that standard mortgage finance would incur.

Related: NEWS: Heavy refurb finance up to 90% gross LTV from £200k now available

How to get a loan for an unmortgageable house


  • Bridging loan approvals depends chiefly on a straightforward valuation of the property offered as security for the loan rather than assessing your earnings and creditworthiness.
  • Short-term bridging finance can be arranged quickly – within a matter of weeks, and occasionally literally within a week.


Bridge loans can be used for:

  • Buying property at auction and the cost of renovations
  • Self-build projects
  • Residential property conversions
  • Finance can usually be repaid any time after a month, and you only pay (by the day) for the amount of time you’ve had the loan.

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Why Traditional Lenders Probably Can’t Help You With Renovation Finance

The first port of call for many home renovators will be their bank or another high-street bank or building society. For various reasons, they’re seldom the best sources of finance for renovation projects.

Unsympathetic to inexperienced applicants: high-street lenders operate according to strictly defined lending criteria. Applicants who don’t have the required building experience are unlikely to be given the green light.  

Picky about properties: traditional lenders’ definitions of properties they classify as unmortgageable include):

  • Anywhere valued at less than £50,000
  • Properties with structural issues (problems with foundations, load-bearing walls, roof framing, etc.)
  • Properties that are derelict or without a functioning bathroom or kitchen

Lack of urgency: conventional high-street mortgage applications can take up to three months to be approved, and more complex renovation projects are even more challenging for their underwriters.

How to get a loan for an unmortgageable house

Finance from specialist lenders

Private banks and independent finance groups take a bespoke approach to lending decisions. They can consider each application on its merits, and if it doesn’t meet their criteria in one area, they may be persuaded that other factors are more favourable.

This flexibility works well for borrowers with non-standard financial circumstances or unusual project setups. However, it doesn’t work well on templated price comparison sites.

As a result, many specialist lenders can only be approached through broker intermediaries, who are expected to have detailed knowledge of various financial products across the property finance market.

They can recommend the lenders most likely to approve your application and offer the most favourable terms. This saves you time and money when arranging lending over the lifetime of your borrowing.  

Applying for Renovation Finance

No two property renovation projects are the same, so you need finance that works for your particular circumstances and building plans. Renovations can easily run over time and budget, at which point the cost of your finance becomes a critical success factor.

At Clifton Private Finance, we have an award-winning bridging team dedicated to driving results. We have relationships with lenders across the whole bridging market and have access to the best deals. Our bridging brokers can guide you through the process and liaise with lenders on your behalf.

To see what we can do for you, call +44 203 900 4322 or book a free consultation below.

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Do you need a valuation for a bridging loan?

Yes, a valuation is typically required for a bridging loan in the UK.  

Since bridging loans are often secured against a property or other valuable assets, lenders will want to assess the market value of the property being used as security. This helps the lender determine how much deposit they want you to provide based on the value and condition of the property. 

How much can you borrow with bridging finance?

You can borrow up to £25m with bridging finance, but it’s typically capped at about 80% of the value of the property you’re using as security. 

It's important to note that different lenders have varying policies and criteria regarding the maximum loan amounts they offer for bridging finance. Some lenders have a maximum limit of over £1 million, while others may specialize in smaller loan amounts. 

Additionally, the terms and conditions of the loan, including interest rates and fees, should also be taken into consideration when determining the overall affordability of the bridging loan. 

Do you need a deposit for a bridging loan?

Yes, you typically need a 20-40% deposit for a bridging loan. 

It can be possible to get a bridging loan without a deposit (a 100% bridging loan), but you’ll need other assets in the background to secure the loan against, and more stringent criteria and higher costs could apply. 

Can I get 100% bridging finance?

Yes, it is possible to get a 100% bridging loan (also known as a 100% LTV bridging loan), but it is rare. This means that you won’t need to put down a deposit and can borrow the full value of your property.  

However, the criteria for these loans can be hard to meet, and you’ll need to provide additional assets as security for your loan. 

Interest rates and fees can also be higher to compensate. 

Does a bridging loan make you a cash buyer?

While using bridging finance doesn’t technically make you a cash-buyer, it can allow you to act like one.  

Mortgages take months to process, often leading to an ‘onward chain’ where all parties involved need to wait for funds to be transferred 

Bridging finance can usually be accessed a lot quicker than mortgages so you can bypass the onward chain, giving you an advantage over other buyers and being attractive to sellers.

What is the longest bridging loan term?

Bridging loans typically have a term of 12 months, but some lenders are willing to stretch their terms to 18 months, or even 2 –3 years depending on the case. 

Terms longer than 2 years will usually only be considered for specific cases.  

Can I use a bridging loan to pay stamp duty?

Yes, you can use a bridging loan to pay Stamp Duty.  

This amount could be covered by a bridging loan, providing you have a way to repay the additional borrowing amount to your lender.  

Are bridging loans safe?

Yes, bridging loans are safe when they’re used in the right circumstances with a solid repayment strategy. However, we recommend speaking to a qualified advisor, like our brokers at Clifton Private Finance, before you take out a product. 

The main factors to consider with bridging finance are that the full loan amount will usually need to be repaid within a year, and like a mortgage, it is secured against a property as collateral. 

This means that in the case that you aren’t able to repay your bridging loan, your property would be at risk of repossession.  

But with a watertight exit strategy, bridging finance can be an efficient way to secure property quickly. 

Can an 80 year old get a bridging loan?

Bridging loans are designed to be short-term so there’s no maximum age limit when applying for a bridging loan. This does depend on the lender, as some bridging lenders do have an upper age limit, but there are lenders on the market who offer bridging loans for borrowers aged 70 and over. 

What is the monthly interest rate on a bridging loan?

Bridging loan interest rates usually range between 0.45% - 2% per month, depending on the case and the market rate.

Unlike mortgage interest rates, bridging loan interest is calculated monthly instead of yearly.

This is because bridging loans are short-term and, in many cases, repaid within a year. Bridging loans can be arranged without early repayment penalties, so interest is calculated monthly to ensure you only pay interest on the months you have the loan for.

Do banks still do bridging loans?

Unfortunately, mainstream banks in the UK don’t offer bridging loans.

This means that if you’re looking for a bridging loan, you won’t be able to get one using a lender you’d find on the high street.

There are a variety of specialist lenders that offer bridging loans, but because these lenders are smaller and more niche, you may need a bridging broker to access them.

How much do banks charge for bridging loans?

Banks typically charge two main fees when taking out a bridging loan – arrangement fees and interest.

But there are other costs to consider such as valuation fees, broker fees and administration fees.

Costs can vary from lender to lender, and will also depend on what your bridging loan is for (e.g., residential or commercial purposes.)

Arrangement fees are what the lender charges you to take out the loan and can range between 1.5 - 3% of your overall loan. Bridging loan interest, on the other hand, is calculated monthly. This can catch borrowers out who may be expecting an Annual Percentage Rate (APR) like with a mortgage.

Can you turn a bridging loan into a mortgage?

Yes, you can convert a bridging loan to a mortgage through refinancing, and it is common among borrowers who use bridging finance to buy residential properties.

However, whether or not you’ll be able to refinance to a mortgage is dependent on your financial circumstances, the lender, and the property you’re planning to buy.

It’s important to be sure that refinancing is a viable repayment option before you take out a bridging loan on a residential property.

Is a bridging loan more expensive than a mortgage?

Yes, bridging loans are typically more expensive than mortgages.

Bridging loan interest rates can be much higher than a mortgage, and are calculated and displayed as monthly rates instead of the usual annual percentage rate (APR) that you’ll see on a mortgage.

However, bridging loans are a short-term solution, and you’ll only pay interest on the months you’ve borrowed money for – and you can repay early without any charges (for most loans).

There are many circumstances where bridging loans are an affordable option and a means to an end - for borrowers that need to finance a property purchase quickly, it may be the only option available.

How are bridging loans paid?

The two most common ways to pay a bridging loan are to sell a property or refinance to a mortgage.

You may also need to ‘service’ the loan through the term, which means paying the interest monthly. However, you can opt to ‘roll up’ your bridging interest to be repaid at the end along with the capital.

There are also other ways to repay a bridging loan, such as selling a business or even using money from an inheritance.

The method in which you pay your bridging loan can be flexible, just as long as it is clear in your application that you have a surefire way to repay your loan when the terms are up.

What is the minimum deposit for a bridging loan?

In most cases, a bridging loan will require a minimum deposit of 25%. However, the minimum can vary depending on the lender and the specific circumstances of the loan itself.

Generally, bridging loans are secured against a property or other valuable assets, and the deposit required is often expressed as a percentage of the property's value, known as the loan-to-value ratio.

In some cases, 0% deposit bridging loans are an option, but only if you have other property or assets in the background to provide additional security.

Do you pay monthly payments on a bridging loan?

No, typically, you’ll repay a bridging loan in one chunk at the end of the loan term. Bridging loans are a form of short-term finance and will usually need to be repaid within 12 months, but there can be room for flexibility.

In some cases, borrowers may be required to make monthly interest payments. This means that each month, you would pay the interest accrued on the loan amount while the principal amount remains outstanding until the end of the loan term.

But usually, the interest is "rolled up" or added to the loan balance and paid with the rest of the loan at the end of the term. This option can help protect your cashflow so you can spend it on moving costs or refurbishments, for example.

How long does it take for a bridging loan to come through?

Bridging loans can be arranged in as little as 7 working days.

However, it depends on the complexity of the bridge loan and your specific circumstances. It may also be more expensive for you to rush an urgent application through – but not impossible.

Bridging loans are a popular option for borrowers who are under time constraints, such as buying a property at auction or breaking a chain.

What is the criteria for bridging finance?

The key factors lenders tend to consider are:

Security - Bridging finance is usually secured against property or other valuable assets. Lenders will assess the value and marketability of your security.

Exit Strategy - Lenders will want to understand how you plan to repay your bridging loan. In most cases, this is selling your old property, selling the new property (flipping), or refinancing with a long-term mortgage.

Loan-to-Value (LTV) Ratio - Lenders consider the loan amount compared to the value of the property being used as security as a percentage. The LTV ratio can vary, but most lenders will have a maximum of 60-80% LTV.

Remember, the criteria for obtaining bridging finance in the UK can vary depending on the lender and your circumstances.