Buying a House > Mortgage Rejected

If there’s any clear factor that may affect the current or future value of the property you’re looking to buy, your mortgage application can be rejected  totally irrespective of your own credit history and solvency. Here are a few things to look out for:

Wooden Properties

Properties made of stone last for hundreds of years. The same cannot be said if you’re buying a house made of wood (and for other “alternative” materials like corrugated iron). If you’re buying a wooden property, there’s a risk that the value of the building itself declines considerably over the course of the mortgage. This means that the property is no longer an effective long-term security on the mortgage lender’s loan, which makes them less likely to lend to you. It means an extra risk for them, which they may not be willing to take.

Properties with Short Leases

There are two types of property ownership in the United Kingdom, freehold properties and leasehold properties. There’s little issue in principle with a property being freehold (where the buyer owns the land the property is built on), but sometimes leaseholds (where that land is leased from a landowner) can pose problems if the lease has less than 80 years to run. But this isn’t a common problem, as many leases run for hundreds (or even thousands!) or years.

Missing Title Deeds

When you buy a property, you have to register your title to the property with the Land Registry. This normally goes off without a hitch but can be problematic if the sellers have lost their deeds and aren’t already registered with the Land Registry. This isn’t a necessarily a deal breaker. The sellers can apply for a possessory title, which in time you can upgrade to an absolute title. However, until you get this, the fact that you don’t have full title may affect the resale value of the property – and this may put mortgage providers off lending on it.

The Mortgage Valuation

As part of your mortgage application, your lender will professionally value the property you want to buy. The aim of this valuation is to satisfy the lender that your desired property is indeed worth the amount you’re borrowing. And if there’s a large discrepancy between what you’re paying for the property and what your lender values it at, you should think carefully – because their figure is likely to be closer to its actual resale price than yours, when you come to sell it.

If the property is valued below your asking price, you can always go back to the seller or estate agent and offer a lower price. Equally, you are free to dispute the lender’s valuation by providing evidence of similar properties in the area selling for the same price or higher.

The Conveyancing Searches

These searches, sometimes called property searches, are a routine part of the conveyancing process. Conveyancing ties up all the various legal loose ends that come with exchanging property. After all, if there are any undisclosed liabilities relating to the property, you (and your lender) want to discover these before you move in, not after. The four commonest conveyancing searches are the Local Authority Search (LAS), Water and Drainage Searches, Environmental Search and Chancel Repair Search.

Think of the property searches as the “speak now or forever hold your peace” moment except for your house purchase rather than your wedding. It may turn out that your dream house has a major skeleton in the cupboard, such as chancel-repair liability for instance, which is where you are liable for the maintenance of a local church. While cases of enforcement are rare, lenders will perceive chancel repairs as an unnecessary risk and something that could undermine the property’s resale value.