How to get a loan for a home built on stilts - Self Build Loans and Mortgages
15/05/2005
It is hard to find a mortgage for unusual properties such as lodges, lighthouses or windmills.
Richard, 41, and his wife, Jane, 40, own a Scandinavian-style wooden lodge that is built on stilts.
The couple paid cash when they bought the lodge in Buckden Marina, Cambridgeshire, two-and-a-half years ago. But now they want to extend it they need a mortgage— and this proved less straightforward than for a more orthodox home.
Richard is a management consultant and Jane runs a cafe bar, The Tap Room in St Ives, which they co-own with another couple. He said: “Getting a mortgage was quite difficult. I tried all the high-street lenders but none was interested. In the end my broker at Savills Private Finance managed to get us a loan with Harpenden building society.”
A spokeswoman for the society said that it was always willing to lend on unusual residential properties as long as they were of sound construction and the valuer believed they were likely to appeal to buyers in the future. Another loan the building society recently approved was for a project to convert a water tower into a residence.
Unusual properties such as windmills, churches and lighthouses are becoming increasingly popular places to live. But although a Martello tower in Sussex or a lighthouse in Cornwall may be your dream home, raising a mortgage on it can mean plenty of digging.
Simon Tyler at Chase de Vere Mortgages, a broker, said: “Unusual properties can be difficult to finance because lenders are concerned about whether they can be resold. If there is likely to be a limited market for it, they will be less keen to lend.”
Just how difficult it will be to get a mortgage will depend on the property and its state of repair. If you are buying a building such as a church or tower that has already been converted into a home, finding a mortgage should be easier than if the property is not currently habitable.
It may be possible to get a mortgage from a mainstream lender. Halifax has provided mortgages for conversions of churches, schools, fire stations, mills and hospitals. Abbey said it did not rule out lending on unusual properties; it looks at applications case by case.
If you are struggling with the main lenders it is worth trying a smaller building society, as they often have more flexible lending criteria than the big banks. Harpenden, Norwich & Peterborough, Chesham and National Counties can be good for more quirky properties.
Norwich & Peterborough said: “Basically, as long as it doesn’t move, we’ll consider lending on it, and in the majority of cases all our mortgages will be available for the borrower to choose from.”
If the property you are looking to buy is dilapidated, securing a mortgage will be more difficult. Ecology building society will lend on derelict buildings. You can borrow up to 90% of the property’s initial value. As work is done and the value goes up, more funds will be released. You will pay the society’s standard variable rate, currently 6.3%, which is higher than on a standard mortgage. However, there is a 0.25-point loyalty discount from the third year.
The other option is to go for a lender that offers self-build loans, such as Norwich & Peterborough or Buildstore. Securing a mortgage will be easier if you provide plans for what you want to do to the building.
Melanie Bien at Savills Private Finance, a broker, said: “It can be difficult to convert ancient and unusual buildings into houses, so lenders will be wary of properties without planning permission to do this. If the property has detailed planning permission for the proposed changes, it will help persuade the lender to let you have the financing. If possible, get architect plans and quotes from builders for the cost of the planned work.”
You will probably have to put down a larger deposit, typically between 15% and 20%. Also with self build mortgages, the funding will be released in stages, not all upfront.
If your ideal home is a houseboat moored on the Thames or a narrow boat on the Grand Union Canal, raising finance is a different ball game; you will not get a mortgage from a mainstream lender even if the boat is permanently moored.
You will therefore need to go to a specialist lender such as Barclays Marine Finance, Roy Scot Larch or Collidge & Partners. Lenders will not allow you to borrow on the mooring, so you will have to pay for it yourself, which can be expensive — in London, a mooring can cost as much as £150,000.
A deposit of at least 20% of the boat’s value will be required and the maximum loan term is usually 15 years. The rates on marine mortgages also tend to be significantly higher than on standard home loans. Roy Scot Larch, part of the Royal Bank of Scotland group, charges 9.9% on its fixed-rate loan for narrow boats.
Ray Boulger at John Charcol, a broker, said: “If you have a property that you are not planning to sell, a cheaper way of funding the purchase of a boat would be to remortgage the house to release capital.”
If you have enough equity in the house you may be able to buy the boat outright. If you cannot do this Boulger said it may be worth taking out a personal loan rather than a marine mortgage for the shortfall, as you can get a loan for under 6%.
However, you would have to opt for a shorter repayment term than the normal 15 years on a marine mortgage, to benefit from the most competitive rates. Suppose you needed to borrow £20,000. If you opted to pay it back over seven years, Direct Line would charge you 5.9%. The best rate over 15 years is 8.4% from Loanonline.
- The Times
