Thinking of property investing in Swindon? Consider buying an Unmortgageable Property

By Swindon Link - 14 November 2023

Expert Voices

Ever wondered how savvy investors manage to turn a seemingly unmortgageable property into a profitable investment? Maybe it's got a short lease, the roof’s dilapidated or the kitchen’s missing - whenever the bank says no, it's a reflection on the risk associated with either the property or you. But where the bank sees risk, property investors see reward. There’s not usually just one problem with an unmortgageable property, but sourcing finance is definitely one of them. How do you decode this profit making puzzle - let’s take a look.

With almost 3,000 sales of old housing stock in Swindon so far in 2023, the Sunday Times estimates that a whopping 5% will be unmortgageable. We'll shed light on what makes properties unmortgageable and dive deep into understanding why such 'undesirable' gems are abundant in Swindon. Those properties are just waiting for their potential to be unlocked.

Understanding unmortgageable properties in Swindon

If you're looking to buy property in Swindon, you might have come across a few labelled as 'unmortgageable'. But what does this mean?

Defining Unmortgageable Properties

An unmortgageable property is one that mortgage brokers find too risky to lend against. Reasons can range from structural defects like subsidence or damp, lack of basic amenities such as running water and electricity, they might be missing a kitchen, bathroom, or a roof which makes them uninhabitable, properties with a low value under £50k, environmental hazards like Japanese knotweed, or simply if its leasehold property and lease has too few years remaining.

Bridging Finance expert Stephen Clark, from Finbri, comments, “Banks are generally unwilling to offer mortgages on uninhabitable property as it doesn’t meet their risk appetite. This is clearly unhelpful for property investors seeking to bring old housing stock back into the market, either for sale or rental, through refurbishment and development. The good news is that there are plenty of lenders who will want to lend on residential property in such circumstances - this is where bridging finance for your Swindon property could play a crucial role.”

Prevalence of Unmortgageable Properties in Swindon

You may wonder how common these properties are? The answer: quite prevalent.

Swindon council is leading a £100m investment programme over the next three years in the town centre’s public realm, transport links and regeneration projects, which are expected to help increase land values, and subsequently property values, attracting fresh investment and businesses. As business growth helps drive population growth this will be a transformative tool for Swindon benefitting the area as a whole, but specifically property investors.

At any given time, thousands of homes in the area are up for sale; some may need more work than others but with every challenge comes an opportunity, and property investors should be keen to consider this area of the UK.

Financing options for buying unmortgageable properties

If you're keen to buy an unmortgageable property in Swindon, there are two primary routes. You can either be a cash buyer or use a bridging loan.

Cash Purchases

As a cash buyer, you can make quick decisions without lender delays and criteria restrictions.

Purchasing with cash is straightforward. It lets you sidestep the need for external financing and provides leverage when negotiating the purchase price.

Even when you’ve bought your new property using cash reserves, you may still consider leveraging a mortgage in the future. If your intention is to rent the property out, after completing the refurbishment work you could then look for a Buy-to-let mortgage to scoop out equity that could then be used for another property investment.

But, of course not everyone has access to substantial amounts of liquid assets to take this approach.

Bridging Loans

A useful alternative is using a bridging loan as they’re specifically designed to provide a fast short-term financing solution that helps bridge the gap between purchasing and refinancing or selling - ideal if your new property needs work before it's mortgage-ready.

The advantage here lies in flexibility – these loans often have less stringent criteria compared to traditional mortgages offerings so they can prove invaluable when looking at more challenging purchases such as those with lease extensions needed, or are in a state of disrepair.

Advantages of buying unmortgageable properties in Swindon

If you're looking for an investment opportunity, buying an unmortgageable property in Swindon could be a smart call. Let's explore why.

Lower Purchase Prices

An unmortgageable property often comes with a lower purchase price. This is because traditional mortgage lenders view these properties as high risk due to issues like structural defects or short leases.

You can potentially snag yourself a bargain and reduce your initial outlay compared to more 'desirable' ownership properties. It’s one way how savvy investors grow their portfolio without breaking the bank.

Why would unmortgageable properties command lower market values? Two reasons drive their price down. Firstly, there’s a hassle factor involved. Whether it's extending a lease or organising renovations, it costs both time and money, and neither of which are going to be 100% known quantities at the time of purchase. This limits the number of buyers and creates a supply and demand dynamic that brings about lower property prices. Secondly, an unmortgageable property means it can’t be purchased with a mortgage. As such, it further limits the pool of buyers by excluding the 28% of the buying market who would use a mortgage. That leaves just those who have cash or can raise finance via alternative methods like bridging loans.

Investment opportunities

Beyond the attractive purchase prices, there are exciting possibilities for profit. With some TLC, these properties can be refurbished and sold on at higher prices – especially given rising house prices in Swindon. Consider the average price paid for properties in Swindon is £308,000 as of September 12, 2023. This represents a rise of 16.0% over the last 12 months for sold prices in Swindon.

Raminder Singh Uberoi, co-founder of Starck Uberoi Wealth Management, shares this sentiment. He suggests that after fixing any structural problems or extending leases, such homes can become quite appealing to buyers who may have previously overlooked them due to their mortgageability status.

Disadvantages and risks of buying unmortgageable properties

The allure of a low purchase price for an unmortgageable property in Swindon can be enticing, but there’s a flip side and it’s crucial to consider the potential risks.

Potential risks

Structural defects are one common reason properties become unmortgageable. Issues like subsidence or Japanese knotweed infestation can turn your investment into a money pit.

Environmental hazards also pose significant risks. For example, hedging might hide problematic areas or pests that could lead to future repair costs. Additionally, you need to check if there is any planned transportation expansion nearby which may adversely affect property prices.

Mitigating risks

To reduce these risks when buying an unmortgageable property, enlist the help of professionals such as chartered surveyors who can provide detailed information on potential structural issues and environmental concerns. Conveyancing specialists will ensure all legal aspects are covered effectively too. If you’re buying from auction with cash it's all too easy to avoid surveyors and structural engineers to save money - a word of advice, don’t. Having all the right information enables you to make an informed decision and side step potential money pits.

Bear in mind the pitfalls as well as profits - investing requires caution and prudence just as much as ambition and drive. Mitigate risks by seeking expert advice; they're like your map in uted territory.

A bridging loan can also offer financial assistance while you renovate a property before selling it on at a profit or renting it out.

If you've got what it takes to buy an unmortgageable property in Swindon. Your journey begins here… Good luck!


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