Which properties are mainstream banks reluctant to provide loans for?
Many people find that they cannot get a mortgage from a high street bank for their dream home. This is not because of their financial situation, but due to the type of house being purchased.
A thatched cottage sounds ideal, but many lenders are wary about houses made with non-standard materials. Thatch is seen as a fire risk and adds maintenance costs to the house, as it needs regularly renewing.
Many enterprising developers have converted disused commercial buildings to residential use. These include water towers, windmills and warehouses. If the lender thinks that the building is too unusual when compared to other property in the area, they may view it as difficult to sell and refuse a mortgage application on those grounds.
Buying a shop on the high street with a flat above it may seem a good idea. The owner can live in the flat with convenient access to public transport for commuting and rent out the shop to help pay the mortgage. These are classed as mixed-use properties and the buyer will need a commercial mortgage. Many high street shops are difficult to let, so the lender will need a business plan that considers the state of the retail market in the area, expected rents and the likelihood of finding a tenant.
If a mortgage application on a more unusual property is turned down, this does not mean that it is impossible to find a loan. A mortgage broker may be able to find a small alternative lender for a mortgage.