How to Mortgage a flat Guide

Below is a guide to obtaining a Mortgage on any type of Flat

Speak to a Mortgage Advisor

Why Flat Mortgages, are a specialist advice area

Flats often get a bit of negative, as shown here in this Which? article, about what properties you should avoid.

We think this is harsh.

Flats can be an affordable, and in many cases, the only affordable route to home ownership.

Not only this, Flats aren’t going anywhere. And there will be a need for them long into the future.

New Build, High Rise and Flats built above commercial premises are some of the most commonly brought properties in and around London and other Large Cities.

However, all of the above can be trickier to purchase with a Mortgage, as Lenders are cautious toward each of these.

And all three of these are featured in the above Which? article.

What deposit do I need to buy a Flat?

You will need a deposit of between 5 and 15%, in most cases.

We know this is broad, but this is because some Mortgage Lenders will require a larger deposit on some Flats than on others.

Where a minimum deposit is usually required, we have broken down what deposit you will need based on the type of Flat you want to buy, below.

Can you get a Mortgage for a Flat?

Yes, absolutely. In the vast majority of cases, Flats are completely Mortgageable.

But when it comes to mortgaging Flats, we can’t just give a sweeping answer on how to do this, because they’re all so different.

So we have broken them down into sections, listed below.

Mortgages for Flats

Mortgages for Flats is a broad term when you consider the many different types of Flats we have in the UK.

For ease, we have broken things down into the following sections:

Mortgages on Standard flats

New Build Flats

Mortgages for high rise flats

Mortgages for Freehold Flats

Mortgages on Short Leases

Mortgages for Flats above Shops and other commercial

Mortgages for Flats above Takeaways or Pubs

Ex Local Authority

Non-standard Construction

Retirement Flats

Studio Flats

EWS1

Buy to Let Mortgage on a Flat

Holiday Lets

Mortgages for Standard Flats

When we say “standard flats”, we mean a traditionally built flat of standard construction which is more than 2 years old.

The flat will usually be no more than 4 storeys high. And where it is, there should be a working lift in the block.

Providing the flat you are considering meets the above, you will usually be eligible for a Mortgage with most lenders with as little as a 5-10% deposit.

Mortgages for New Build Flats

Mortgages on New Build Flats are usually acceptable with most Lenders subject to a minimum deposit.

The minimum deposit required is usually 15%. Although it could be less in some cases.

If you were looking to purchase a New Build Flat through the Help to Buy Scheme, you could obtain a Mortgage with as little as 5%.

With an additional 20% from the Government in the form of a Help to Buy Equity Loan.

The reason for the minimum deposit is Lenders feel there is quite a high risk that if you were to resell the property a short while after purchase, there could be a risk of you getting less back than what you paid.

The risk to the Lender here, is if they needed to gain repossession on your Flat, then there would be a risk of them not getting the full Mortgage back.

Mortgages for high rise Flats

Generally Mortgage Lenders will consider high rise flats regardless of the size subject to the Valuers/Surveyors comments.

If the Flat is considered to be easily resaleable by the Valuer, then the Lender will likely approve this.

The Flat will usually need to have a lift when over 4 stories.

Be Fire safe. For example meet current fire safety regulations.

Providing the above is met, you should be able to get a Mortgage up to the Lenders standard loan to value levels.

Mortgages for Freehold Flats

This is quite a complex area and shouldn’t be confused with a share of the freehold which is generally acceptable to most lenders.

You will be quite limited on Lenders when it comes to Freehold Flats.

There is around half a dozen Mortgage Lenders which will consider this and each have different criteria.

We recommend speaking to an experienced Mortgage Advisor in this instance. Which we’d be happy to put you in touch with here or using the above contact form.

Some Lenders will restrict the Lending on Freehold Flats to 85% loan to value. Others won’t and will just take the Valuers guidance on whether the flat is readily saleable.

Short Lease Mortgages on Flats

A lease is the number of years over which you have ownership rights over the property.

When you are purchasing a flat, you would ideally want the lease to be in excess of 85 years.

A short lease on a Flat would be classified as any term less than 85 years.

For each year less than 85 years, you will find the value of your property decrease as well as the number of potential buyers. 

In addition, you will find that the cost of extending the lease, will be more expensive for each year less than this.

It would be well advised that any property you intend on purchasing, that has a lease remaining of around 85 years or less, has an extension to the lease negotiated as part of the purchase.

This will protect the value of your home, and make easier for you to obtain a Mortgage on in the future.

What is the minimum Lease required to obtain a Mortgage?

30 years is the minimum lease you will be able to obtain a Mortgage on.

This will only be doable with a handful of lenders though.

As most Mortgage Lenders will require a 50-70 year lease remaining.

Barclays tend to be a good lender when the Lease is really low.

Mortgages on Flats above shops and other Commercial premises?

It’s becoming increasingly common to find newly built flats, above commercial premises.

This can reduce the number of Mortgage options you have considerably.

And the type of commercial premises can also have a big impact.

For example, a commercial premises above a shop or office, may be considered as acceptable by most Lenders. 

However, a flat above a pub, bar, restaurant or takeaway, whilst desirable to some, won’t be desirable to most.

Flats above Pubs and Restaurants

As above, Flats above Pubs, Restaurants etc are less desirable to Mortgage Lenders and Homeowners alike.

As a result, most Lenders will not lend on these types of properties.

Fortunately, there are some mainstream Mortgage Lenders and other smaller Lenders that will accept these subject to the Valuers/Surveyors comments.

In these instances, the Mortgage Lender will be looking for reassurance that the area you are buying is desirable. And therefore will be easy to resell should they need to gain possession from you.

HSBC is the largest lender which will consider these properties.

Ex Local Authority Flats

This is when you purchase a flat which was previously owned by the local council or a local housing association.

They can be quite common, and fortunately most lenders will consider these, providing the following:

The Valuer determines the flat is easily resaleable.

The majority of the block of flats (usually 50% or more), is now privately owned.

And some Lenders won’t accept properties which have “deck/balcony access”.

NatWest tend to be a good lender on these types of properties. 

Non-standard Construction Flats

These can be very common.

A largely number of Flats, now considered to be non-standard construction, were erected during and after the war.

They were generally considered to be temporary housing, but ended up becoming a permanent fixture.

It’s a broad term and some non-standard construction built flats are better and sturdier than others.

Non-standard means the property isn’t made of Brick or Block and Tile or Slate.

There a dozens of different types. But the most common are:

Prefabricated Concrete

Wimpey/other No-Fines

Steel Framed

These property types are usually more complex as they are often coupled with being Ex-Local authority.

What Lenders will accept you will be dependent on a variety of things.

Some Lenders require:

Engineers/Surveyor Reports

A maximum number of 2-4 storeys.

A minimum deposit.

Retirement Flats

These types of properties usually have a restriction attached to them meaning they can only be sold to the over 55’s for example.

This can of course mean the property doesn’t have a wide market in which it can be resold to.

Due to this, there are only a small handful of lenders that will consider this type of property.

One of these Lenders is Leeds Building Society. Leeds have been mentioned, as they also allow lending into later life and have a few products specifically for the over 55’s.

Studio Flats

Studio Flats will usually be easy enough to Mortgage when there is a minimum floor area of 30-35 Squared metres.

 When the Studio Flat is less than 30 metres squared, the number of available Lenders reduces massively.

So this should be a key consideration when viewing any studio flats, and one to ask the sellers agent.

When the property has an area less than 30 metres squared, there are a handful of mainstream Mortgage Lenders which will consider these.

Santander is one of the Lenders which will usually consider these properties.

EWS1 – Flats with Combustible Cladding

The EWS1 – Flats with Combustible Cladding scandal is one that is raging on.

Grenfell was a National tragedy that bought about a rushed change, which essentially made 1,000’s of properties legally unsafe.

This created an unrivaled financial burden on the innocent residents, who were unaware they had bought a potential death trap.

As a result of the regulations that were bought in by Governments, the properties became unmortgageable. 

This meant residents had two options. Stay and live in your unsafe flat, or sell it for cash at a fraction of the amount you paid for it.

There may be one very specialist Mortgage Lender which will consider this.

But to be honest, in many cases it will be better to stay with your existing Mortgage Lender or look to purchase an alternative property. At least until the properties have been made safe and the required remedial work has been completed.

Buy to Let Mortgages on a Flat

Buy to Let Mortgages will be available on the majority of the above property types, accept for Retirement Properties.

The minimum loan to value in most cases will be 75% loan to value, meaning a 25% deposit required.

However, in some cases, 80-85% loan to value Mortgages will be possible.

Holiday Lets

Holiday Let Mortgages are a specialist type of Buy to Let Mortgage which have become increasingly common in recent years.

Most mainstream Mortgage Lenders will not lend on these types of Mortgages.

However, quite a few of the smaller finance houses and Building Societies will consider these properties.

One of the most prominent Mortgage Lenders in this space is Principality Building Society.

What documentation will the Mortgage Lender need?

What documentation the Mortgage Lender will need, will vary between Lenders.

Mortgage Lenders will usually need to verify you, your income and outgoings.

To do this they will require the following:

3 Months Payslips or Latest 1-3 years Accounts/Tax Calculations for any Self Employed Earnings

Bank Statements to evidence Earnings and Outgoings

Identification to prove your Name and Address.

Mortgage Lenders may also require:

P60 for the latest year

EWS1/Other Safety Certificates or Surveys

Reservation forms in the case of Newly Built Properties.

What Mortgage Repayment Options will I have?

You will have the 3 main repayment options to choose from:

Capital & Interest Repayment: Will repay your Mortgage balance as well as the interest to the Mortgage Lender.

Providing you keep up with repayments you are guaranteed to have repaid your Mortgage by the end of the term.

Interest Only: Where you just pay the interest to the Lender each month.

As mentioned above, Interest only payments to the Mortgage Lender will mean at the end of the term, you will still have the full Mortgage balance to repay.

Offset: Harder to come across these days. An offset Mortgage is where you have a savings account linked to your Mortgage.

The money you save into that account is taken away, or offset, from your Mortgage balance that you pay interest on.

Offset Mortgages are good for those with large savings balances.

What types of Mortgages will be available on Flats?

You will have the 7 different types of Mortgage available to you:

Fixed Rate Mortgage: Simply put, this is where your Mortgage is fixed for a certain period of time, usually for 2 to 5 years.

The rate is best to be thought as fixed for you and the Lender.

As during this time your interest rate is guaranteed not to change. And you are unable to leave the Mortgage early without paying a fee to the lender for doing so.

Variable Rate Mortgages: Where your interest rate can vary. You will usually have a set interest rate which can fluctuate throughout the term.

The interest rate will usually change in line with the Bank of England base rate, although it doesn’t have to.

Tracker Mortgages: Where your interest rate will track a certain index, usually the Bank of England Base rate.

When the Base rate changes, so will your Mortgage rate.

Discount Mortgages: A variable rate Mortgage which will be discounted by a set amount, usually from the Mortgage Lenders standard variable rate, for a defined period of time.

Other Mortgage Types:

Flex Fixed Rate Mortgages: This types of Mortgage is rare, and only a couple of Mortgage Lenders offer these. But they can be great.

This is where you have the security of a fixed rate, without the downside of an Early Repayment Charge to leave the Mortgage, should you need to.

So if you anticipate that you may wish to repay your Mortgage early. This can be a great option.

Cap and Collar Mortgages: A type of Tracker of Variable rate Mortgage which can not go above a certain rate (the Cap) and/or cannot go below a certain rate (the Collar).

What’s next?

Speak to a whole of market Mortgage Brokers which can provide you with the specialist Mortgage Advice you need.

Please complete the above contact form at the top of the page.

Or you can contact us here.

Our Mortgage Brokers

We work with a variety of Mortgage Brokers which each specialise in different Mortgage Advice areas.

When you get in touch, simply select the reason why you’re getting in touch i.e. First time buyerBad Credit, Remortgage etc. And we will match you to the Mortgage Broker which Specialises in your circumstances.

All of the Mortgage Brokers we work with are whole of market, FCA regulated, CeMap qualified and have consistently great reviews.

Get in touch for a free non-obligatory conversation with one of our Specialist Mortgage Advisors for further information on how they can help you.