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Mortgages on listed buildings

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

How to get mortgages on listed buildings in the UK, including Grade II listed buildings

Have you ever wished to live in a converted church, lighthouse, windmill, or mill?

Living in a historic home is a way to find rustic charm and the opportunity for some of life’s greatest pleasures with high ceilings.

People can be put off by the fear of finding a mortgage lender who will lend a mortgage to a listed property.

Mortgage lenders want to be sure that a property is a good security deposit for a loan so they can easily resell it in the event of repossession. There is a concern that the less common the property, the smaller the market.

Exotic conversions, timber-framed properties and thatched cottages can all be subject to increasingly automated lending criteria by the banks. However, they can refuse to lend to properties listed as grade ii listed buildings, 1, or 3.

We have a few mortgage providers lending a listed building mortgage and we will ensure to match you with a mortgage lender whose lender criteria you meet.

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What is a listed building according to lenders?

Mortgage lenders will recognise the traditional listing process. They will decide whether to lend or not depending on the property’s condition and the comments of valuers.

A listed building is one that the National Heritage List for England has designated as having a particular historic or architectural value. This means the building is legally protected and must be maintained in accordance with a set of rules.

Mortgage advice is highly recommended for listed buildings, and we can help with any advice that you may require.

What are the differences between grades, and how does it impact mortgages?

There are many levels of listed buildings. Each has its implications when it comes to mortgage approval.

  • Grade 1 is the highest level and is classified as “buildings with exceptional interest”. These properties often require the most excellent care. Most lenders won’t consider grade 1 property because of potential problems with its structure, habitability, or saleability. Many mortgage lenders will lend to grade 1 property. Speak with a specialist mortgage broker for this.
  • Grade ii listed buildings* This is the next and most common level. It’s also known as “buildings that are of special importance or greater than special interest”. These properties are more mortgage-able than grade 1.
  • Grade ii listed buildings that are of particular importance and should be preserved. This category is the most widespread, with 92% percent of listed buildings falling within this category. Even though they are more common, grade two listed buildings require higher maintenance than standard properties.

Find out if and how many properties are listed in the planning section at your local council’s site.

What does the property grade listing have to do with mortgage approval?

  • Some lenders will flatly decline any property listed.
  • Some people are content with grade 2
  • Some people are content with grade 2*
  • Others are content with grade 1.
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Maximum loan to value for listed property mortgages

Due to the higher risk of lending to such properties, some lenders limit the maximum loan-to-value (LTV) they will lend. Some lenders limit the amount of money they will lend to 75 or 80%, while others are happy to lend as high as 90-95%. LTV caps are more likely to be capped for properties with lower grades.

The maximum term for listed property mortgages

Lenders may be willing to lend on the property, but they will limit the term to 20-25 years to minimize the risk of the property becoming less desirable over time. Lenders can limit the term for loans with a lower grade.

Be aware of restrictions.

Lenders will carefully consider restrictions on the property. They may reject your application if they find it too burdensome. The vendor should declare any restrictive covenants on the property title before it is sold. These will be visible on conveyancer searches.

For mortgage purposes, insure the property listed.

The terms of any mortgage contract will require that the owner have building insurance. Due to their age and unique characteristics, some listed properties may be expensive or difficult to insure. The property’s current condition is tied to its market value, so it may not be possible to restore the property to its original value if lost completely.

You might consider getting the property insured before you buy. Or, at the very least, getting a quote. The premiums could make you reconsider buying.

Commentary from valuers on the impact of listed property on the mortgage

Even lenders who accept listed property will state that they use “valuer comments” to decide whether the property is suitable as security. It is essential to identify a lender who accepts listed property. However, you should also consider the cost of a valuation fee to determine if they will lend.

Some lenders do not charge valuation fees for purchases. It may be worth looking into these lenders.

UK mortgages for listed properties

The system of grading a listed building varies depending on its location in the UK. Scotland and Northern Island, for example, grade their listed buildings differently from England and Wales.

Listed status England & Wales

  • Grade I – Buildings are of exceptional or national architectural or historic interest.
  • Grade II* – Significant buildings that are more than just local.
  • Grade II – Buildings with special architectural or historical significance.

Listed status Scotland

  • Category A – Buildings of national and international significance, whether architecturally or historically, or fine, unaltered examples of a particular period, style, or building type.
  • Category B – Buildings of regional importance or greater than local significance or significant examples of a particular period, style, or building type that may have been altered.
  • Category C – Buildings of local significance, less-examples of any style, period, or building type, as constructed originally or modified moderately, and simple, traditional structures that can be grouped with other listed houses.

Northern Ireland

  • Northern Ireland’s listed buildings are graded according to a similar system as Scotland.

What minimum deposit is required to get a mortgage on a listed building?

We are frequently asked if a higher deposit is necessary due to the risk associated with buying a listed property.

Larger banks and building societies tend to have more rigid and flexible criteria regarding listing building mortgages. Some lenders will accept mortgages for Grade One properties with a 95% loan-to-value, but only if they have received comments from a valuer.

If you are serious about buying a property listed on the MLS but have difficulty finding a lender willing to lend to you, it is a good idea to consult a mortgage advisor. They will be able to search the market to find the best mortgage for you and can help you find the right one. Specialist brokers have access to the entire market. Click the link below.

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Can adverse credit affect my listed building mortgage application?

We have helped many homeowners.

Adverse credit refers to a poor record in repaying credit obligations.

It is possible to mortgage a listed property regardless of your credit history, depending on your situation.

  • Late payments
  • Defaults
  • CCJ’s
  • Mortgage arrears
  • Debt management plans
  • IVAs
  • Bankruptcy
  • Repossession
  • Or you can combine them all

Additionally, determining whether you have “bad” credit is subjective as each lender uses different criteria to determine if someone can repay their mortgage.

So, one lender might approve you and reject you, regardless if you have ‘bad’ credit.

Lenders may require more deposits or charge higher interest rates and fees for bad credit. This depends on how old your credit is.

However, some poor credit mortgage lenders offer highly competitive rates and accept as little as a 5% deposit even for people with bad credit histories. You’ll likely need to deposit more if you want to get a mortgage on a listed property.

Is there any restriction on buying a listed property

Before applying for a mortgage on a listed building, you should consider some things.

Did you know, for example, that self-build companies will be more open to mortgage applications if the applicant plans on converting the property into a residence?

These are just a few factors and restrictions you must consider before purchasing a listed property.

Obtaining permission from your local authority

You will need permission from the local authority if you intend to work on a listed property. This is true even for simple tasks like changing the windows, installing new doors or installing satellite dishes.

Councils can be strict about alterations. Before applying for mortgage financing for a listed property, ensure you know what you can and cannot change.

Work that is done without consent is considered a crime. Failure to get permission can lead to severe problems for new homeowners.

It can be challenging to modify or destroy a property whose feature is not explicitly listed in its official listing document.

It is best to buy a listed building for its unique characteristics.

Repairs and maintenance costs for a listed building

You should budget for maintenance as listed buildings are more expensive than modern homes.

Lenders will require proof that you can afford to maintain a Grade 2 listed building.

They will also be concerned about your ability to maintain the historical features of the property. This can prove costly as ‘off-the-shelf’ doors and windows are not likely to be accepted by local planning authorities.

Restoring original features can also require the expertise of a tradesman. This can increase costs.

Lenders will consider your income, job security, and other financial factors to determine whether or not they approve your mortgage application.

The right surveyor

A wrong surveyor could give inaccurate, inexact or extremely costly advice that can lead to the lender declining the mortgage. Research is key. Hiring a specialist building surveyor is a good idea as they have the knowledge and expertise to help you navigate the process.

Once you are satisfied with the property and have completed the mortgage application, or you may want to pay for your valuation to help you get approved for a mortgage, a lender will value it.

It is crucial to choose the right lender. They will assign the valuation to a particular surveyor. If they do not understand the property and the market well, they could misvalue the property and potentially jeopardise your mortgage.

This can often occur when a surveyor undervalues a property.

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Look at past work

Are there any previous owners who have done work on the graded property? And, even more important, was it authorised? This is vital because you could be responsible for the cost of rectifying any unapproved modifications or work.

Before applying for a mortgage or making an offer, ensure you have obtained the required building consent listed. This will help to avoid any inheritance issues.

If the property is not following the consent plans, you, as the new owner, will be responsible for correcting any errors.

Do I need professional advice before applying for a mortgage on a listed building?

Yes!

Before applying for a mortgage, we recommend that you consult a mortgage advisor.

They can help you find the best lender based on your personal financial history, income, and industry knowledge.

This can save you time and stress by allowing you to concentrate on the best options.

Click the link below to begin your journey.

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What are my next steps if I want to get a mortgage?

Many lenders will accept your application for a mortgage on a listed building. They can also assist you in the purchase of a unique property.

Our specialist advisors will assess your situation, know the best lenders for you, and give you the right advice about the best mortgage.

A lender may not consider you for a mortgage on a listed building if you are financially or otherwise unfit. However, this does not necessarily mean that another lender will reject you.

Talk to a mortgage advisor for listed properties today

Looking for a mortgage on a grade-listed building, click the link below. We provide mortgage advice and do all the stressful work for you.

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