Updated 27 February 2023
Want to listen instead of read? Here are a couple of interesting podcasts about property finance:
- How to maximise the value of your luxury property purchase
- International Property Insights: French Real Estate
Borrowing money for property can be challenging at the best of times. However, if your property is unusual in any shape or form, this can make it even more complicated. If you encounter an unexpected issue along the way or your real estate deal is a bit different from the norm, this can make it more difficult for you to get the finance you need. However, it is certainly not impossible. With that being said, read on to discover everything you need to know about securing finance for an unusual property.
The majority of mainstream lenders are not going to be willing to let you borrow money if they see even the smallest cause for concern. This is going to be the case even if the problem is minute or you know that you have a resolution to the issue. The majority of lenders like vanilla assets; something plain with no complications that will make them feel comfortable with the risk they are taking in lending money to you. So, if you have a somewhat unusual asset or project, this can make things more challenging when it comes to securing finance. However, it is not impossible. This is what unusual property finance has been developed for, and there are some specialist lenders that will be willing to lend you money even if the circumstances are not exactly traditional.
Lenders like there to be as much certainty as possible. Uncertainty or open-ended questions surrounding planning permission tend to make it much more difficult to secure finance. A lot of lenders want you to have planning permission before you approach them, rather than there being any open issues that must be ironed out prior to the purchase, development, or project going ahead.
Most lenders tend to have a very wide lens when it comes to their view on planning ‘problems’ or ‘issues’ and so even a problem that is tiny can make borrowing impossible, even if you are sure that it can be solved. In this case, securing finance from a mainstream lender is virtually going to be impossible. Because of this, you are going to need to look at alternative and niche lenders who will be willing to look at the planning issues in closer detail.
You ultimately require a lender who has a bit more capacity for risk and will not simply shut down the prospect of making a deal as soon as there is a little issue. Instead, they will assess planning issues based on how easy the issue is going to be to resolve, rather than making a sweeping assumption that the bump in the road is going to have a negative impact on the property you are going to purchase.
There are a number of different factors that will influence how willing lenders will be to let you borrow. Of course, they will consider the planning issues at the heart of your case. However, they are also going to look at the team that is going to be solving the problem, your experience, and also your profile. You should also make sure that you have a solid in place for resolving the issue so that you can put the lender’s mind at ease.
If you are facing an issue that seems impossible to resolve from a practical or legal point of view, even lenders who often lend you money are not going to consider lending money to you in this instance. After all, lenders want to know that their money is secure and that you are going to be able to repay their funds. This is why it is imperative to make sure you have a good strategy in place and that you showcase this effectively.
Lenders will weigh risk very carefully when it comes to any sort of property purchase, but when there are unusual or restrictive covenants involved, they are going to need to tread with even more caution.
It is important to take into account that unusual or restrictive covenants on their own are not necessarily a problem for lenders. Nevertheless, they can become an issue if they could have an impact on your property or if they are limited for any reason. Often, this will end up meaning that it can be difficult to find a lender for your property. This is because not every lender is going to have the capacity or appetite to lend against a property that has unusual or restrictive covenants. Nevertheless, there are some that will be willing to consider lending to you, so long as you present plans that are workable and feasible.
If the property you are interested in purchasing is restricted by unusual or restrictive covenants, the way you present your application to lenders is vital. Lenders are likely to view your application in a better light if you have sensible plans that will tackle issues head-on, so do keep this in mind.
This is why it makes sense to work with experienced mortgage brokers, especially if you want to borrow £1 million or more, who will be happy to assess your application and provide their advice and feedback. They will be able to ensure your plans are put together in a cohesive manner and they will give you access to the best lenders based on your application and the type of property you want to purchase.
As you can see, it is certainly not easy to secure finance for an unusual property, but this does not mean that it is impossible. There are a number of different avenues that you can go down, and there are plenty of lenders that have been set up for this exact reason. It is simply about making sure that you have your finances in order and that you work with an experienced broker who understands the market and can make sure you are aware of all of the options available to you.