Not all mortgage applications are approved and can be declined for a whole number of reasons. Ranging from the applicant such as affordability or credit, down to the property they are buying. But we are going to focus purely on the property side of mortgage declines and in particular mortgage applications for property purchases in the Hull area. This blog is not to scare anybody, simply to help you better understand the mortgage review process and help you avoid some of these pitfalls when you next apply for a mortgage for a property in Hull. 

 

So, what are these risks and how can you avoid them? Well take them each in turn, explaining them and well provide you with tips on how to work around them. 

Despite the flood taking place 19 years ago now, Hull is still considered a flood risk area by some lenders despite the extensive flood alleviation work carried out by the local councils to make sure it never happens again. Some lenders (who we wont name) are still using a database that has Hull considered a flood risk area when they assess properties to lend on. They check this database to help decide before they even value the property. So, before the lender has even taken a look at the property they will decline the issue. 

 

Now, you can work around this point if you are using an independent mortgage adviser who can appeal this decision with supporting evidence, but some lenders make this a final decision. With a little research your adviser can find out which lenders are using this outdated database to work around it or prepare for the questions to follow or avoid that lender all together. 

Some areas of Hull have a high saturation on investor-owned properties rather than being homeowner owned. This may seem like an insignificant issue to most, but lenders always look at worst case scenario which is ‘can they get their money back if you fail to make your payments?’ If there is little demand in that area for home ownership because there are too many investment properties in that area, they feel they may struggle to sell the property for its full value quickly in the event they need to if their only available market is investors rather than investors and homeowners. 

In the past we have seen some lenders decline mortgage applications in the case that they hold mortgages over too many properties already within that postcode which leaves them too exposed for their liking. This is another point which leaves many people head scratching (advisers included) but these is explained by saying if that area was negatively impacted by a new development such as a new power plant being built close by or house prices plummeted in that area they may be stuck with many mortgages that cannot be repaid or properties that cannot be resold. 

 

Older properties in unhabitable conditions 

 

To obtain a mortgage on a property it must be classed as habitable by the valuer, and habitable from the day you complete on your purchase. That means it must be fit for you to live in from Day 1. It must have fully functioning amenities such as kitchen and bathroom and be safe to live in e.g. dry, clean and no risk of injury. If the property simply needs modernising but is functional, that is OK. But if the property needs multiple tradespeople to get the property into a habitable condition before you can move in, the application will be declined. 

 

We see this with several properties, mainly on the buy to let mortgage side of the sector as many investors buy older properties below market value and add value by completing a full refurbishment of them. But the state they buy the properties in isn’t fit for a mortgage. They will be post completion of the refurb work but not before. We see this in areas such as HU1, HU3 and HU5 where these properties were built pre-WW2. 

Due to the high number of HMOs (Houses of multiple occupancy) in Hull, Hull City Council enforced the article 4 restriction. The Article 4 restriction restricts the conversion or letting of HMOs in certain areas due to the high number of them in that area already and to preserve that area for homeowners. These areas predominantly effect the streets surrounding Hull University and Hull Royal infirmary (Mainly HU5/6 and HU1). Now this mainly impacts investors and buy to let investors looking to buy or convert a house into a HMO, but best advice is to check the local council’s website to see if the property you are buying falls into that area before committing to buying it. If the property has historically been used as a HMO and you can evidence this you can be granted ‘grandfather rights’ which allows you to continue to use the property as a HMO as it has been used as one since before the article 4 was brought into effect. 

There are not many leasehold houses in Hull, this mainly applies to flats and apartments usually. But Hull does have a large area of leasehold houses within HU5, just off Willerby Road. In West Hull. Buying a leasehold property is not too dissimilar from buying a freehold except the lender will look at how long is left on the lease when you are buying the property. The reason being is extending a lease can prove quite costly, so costly you may not want to extend it or the person buying your house from you won’t want too either. Lenders want to see at least 70 years left on the lease if they are to lend on the property as this is ample time to repay the mortgage in that time frame so the liability for them ends once you repay the mortgage and ample time for you to look to extend the lease. Anything less than 70 years will cause you an issue finding a lender to lend on the property, if they were to lend at all. 

This ties into the point about lenders looking at worst case scenario and their ability to sell the property for full market value and fast if they need to repossess the property. Properties close to commercial units bring doubt that the property can be sold quickly and for full price if it is in close proximity to a commercial unit. When we say commercial unit, we mean anything that is used for business purposes rather than for residential. Mainly lenders do not like anything that runs during unsociable house such as bars, pubs and restaurants. Anything that lets off sound, heat and smell also so takeaways, factories and car garages etc. If you are thinking of buying a property near a commercial unit you want to be a considerable distance from the unit itself so that it does not impact your ability to sell the property. At the end f the street should be fine, but a couple of doors down may cause the lender to decline the application for the reasons we have covered. 

 

Don’t navigate the Hull property market alone, let use guide you every step of the way. Call us today! 01482 205084.