Buying an Unmortgageable Property - The Complete Guide

By Georgia Galloway | Tuesday 1st August 2023 | 7 minute read

Our goal is to guide you on how to buy an unmortgageable property, ensuring the process aligns with your investment goals. 

We believe that understanding how to navigate this complex terrain can either save you money or yield significant returns.

Subsidence damage at windows in an old house in the Cotswolds, England

Understanding Unmortgageable Properties

An unmortgageable property is essentially an asset considered too risky for standard mortgage lenders to finance. These properties often have issues or complexities that deter traditional lending institutions. However, with the potential for high returns on refurbished property - how to buy an unmortgageable property becomes a question many investors are asking.

Defining an Unmortgageable Property
The reasons why a property may be deemed unmortgageable can vary widely, typically falling into three main categories: structural problems, legal intricacies, and location-based challenges.

Any factor significantly amplifying risk can result in the labelling of a property as unmortgageable. Here are a few common ones:

  • Short lease properties: Leasehold properties having fewer than 70 years remaining (sometimes even 80, depending upon specific lender criteria) usually get refused mortgages due to diminishing value over time. This happens because when the lease runs out, the freeholder reclaims back ownership unless the extension process gets initiated beforehand.
  • Defective titles: Occasions where past conveyancing work has been executed poorly, leaving land registry documents with unresolved matters, causes confusion regarding rightful owners hence becoming a risky proposition financially speaking.
  • Structural issues: Structural complications such as subsidence or severe dampness could render the building unsafe for habitation and thus unsuitable from a lender's perspective. Non-standard construction methods might also place the property in this category due to their perceived higher risk by lenders.
  • Non-standard construction: Properties built using non-standard construction methods or materials may deem the property unmortgageable. Some lenders are cautious about financing properties that deviate from traditional construction due to concerns about durability and resale value.
  • Illegal alterations: Modifications carried out without obtaining required planning permissions or breaching building regulations turn problematic. 
  • Environmental hazards: Properties located in areas prone to environmental hazards, such as flooding or subsidence, may be considered unmortgageable by some lenders. Additionally, Japanese knotweed is a type of natural incursion, an invasive species that can also impact the mortgage ability of the property. The risk of potential damage and insurance claims makes these properties less attractive for mortgage brokers. 
  • Absence of essential services: Properties without essential services like water, electricity, or proper road access may face difficulty obtaining a mortgage. Lenders prefer properties with basic amenities to ensure the borrower can occupy and maintain the property.
  • Unmarketable properties: Some unique or unconventional properties may be challenging to sell in the open market. The property's location may also impact the profitability and deter future buyers - lenders may hesitate to mortgage such properties due to difficulties estimating their value and resale potential.

The Risks and Rewards of Buying an Unmortgageable Property

Whilst bridging loans are more typically used for standard, mortgageable house purchases if you're embarking on the journey to purchase an unmortgageable property, a bridging loan can help.

 Buying an unmortgageable property can be a path laden with potential pitfalls, but could lead you toward substantial rewards.

Potential Risks to Consider When Buying an Unmortgageable Property
Unexpected Renovation Costs: An integral part of dealing with unmortgageable properties is understanding their condition. Often unfit for a standard mortgage due to structural issues or other problems, these buildings may require extensive repairs before being sold or lived in.

The renovation costs can significantly impact your profit margins, especially if additional issues surface during renovations that weren't apparent at initial inspections.

Securing Finance: Another hurdle often faced by investors when purchasing unmortgageable properties is securing finance. The perceived higher default risk attached to such assets makes many lenders reluctant to finance them.

Possible Rewards from Investing in an Unmortgageable Property 
Bargain Purchase Prices: If you're looking for below-market prices, investing in unmortgageable properties might just hit the mark. Given their unattractive nature for most buyers, sellers often price these lower than similar ones without such issues. 

If managed efficiently, renovating and selling or renting out these 'unlovable' buildings could yield significant returns once revalued post-renovation. Some investors purchase these properties with the fundamental purpose of making the property mortgageable - resulting in a substantial profit.

In addition, some auctioned-off unmortgageable properties come with pre-packaged planning permissions already granted, adding value upon completion, making them even more attractive investments despite initial hurdles.

How Can I Locate Unmortgageable Properties for Sale

Unmortgageable properties, particularly those in a derelict state, are often available for sale at auctions rather than being listed by estate agents.

Buying a property at auction houses can present an excellent opportunity to acquire a promising property at a lower price and typically sell quickly, but it's necessary to be aware of the associated risk factors.

Locating unmortgageable properties for sale, especially those in a derelict state, can be a challenging but potentially rewarding endeavour. Here are some strategies to help you find such properties:

  • Property Auctions: Property auctions are a common place to find unmortgageable properties. Check with local auction houses or online property auction platforms for upcoming auctions; while an effective method to obtain property, there are typically a number of competing buyers - so having the finance readily available provides an advantage. These properties are typically marked as "in need of renovation" or "cash buyers only."
  • Local Estate Agents: While estate agents may not list unmortgageable properties openly, it doesn't hurt to reach out and ask if they have any distressed or derelict properties available for sale. Building relationships with agents who specialise in these types of properties could be beneficial.
  • Property Investment Groups: Join local property investment groups or forums where investors might share information about unmortgageable properties or distressed sales.
  • Online Property Portals: Some property listing websites might have filters that allow you to search for properties needing renovation or those that are cash buyers only.
  • Local Council and Planning Departments: Contact the local council or planning departments to inquire about derelict properties or homes with unresolved issues. They might be aware of properties needing renovation or those that have become difficult to sell due to various reasons.
  • Public Records: Check public records for properties that have been vacant for an extended period or have outstanding issues with planning or building regulations.

Financing Options for Purchasing an Unmortgageable Property

When it comes to purchasing an unmortgageable property, the financial side of things can seem daunting. However, there are several avenues available that could make this process more manageable.

Bridging Finance as a Viable Option for Funding

A bridging loan is a short-term finance solution created to fill the void between current circumstances and when you can obtain long-term financing. This type of funding is typically arranged within 3-14 days, which makes it ideal if you're looking at buying from auction houses or need quick completion on a purchase.

The flexibility of bridging finance extends not only in terms of repayment schedules but also interest rates. One significant advantage they offer buyers interested in unmortgageable properties lies in their valuation method: Bridging lenders provide funds based on open market value rather than just the purchase price, thereby reducing the upfront deposit required. 

Purchase as Cash Buyer
If you have the financial means to buy the property without relying on a mortgage, you can proceed as a cash buyer. Some sellers prefer dealing with cash buyers for unmortgageable properties, as it speeds up the sale process and minimises potential complications.

To ensure you make an informed decision, it's advisable to engage a chartered surveyor. They can identify property defects, estimate repair costs, and prevent any hidden issues the seller may try to overlook.

Private Investors and Their Role in Financing Such Properties 
In specific scenarios, private investors might be willing partners in providing the necessary capital for such ventures. These individuals or firms often seek unique investment opportunities undeterred by risks associated with non-standard construction assets.

To win over these potential backers, one must present them with a detailed business plan showcasing how refurbishment works will transform the property into a mortgageable state, hence generating profit through its future sale or rental income post-renovation phase.

Key Takeaway: 
When identifying how to buy an unmortgageable property, consider bridging loans for their quick arrangement and flexibility in repayment. Private investors can also be a viable option if you present them with a detailed business plan. If possible, cash purchases eliminate complications tied to securing standard mortgages but require significant initial capital.

Legal Implications of Owning an Unmortgageable Property

Purchasing an unmortgageable property can be a wise investment move, but it's not without its legal intricacies. The process of obtaining necessary permits for renovations or repairs is one such hurdle that needs to be crossed.

Obtaining Necessary Permits for Renovations or Repairs
If you're planning on refurbishing the property and transforming it into a mortgageable state, securing all required permits becomes paramount. Without these permissions in place, your renovation plans could hit a brick wall with potential fines or even lawsuits from local authorities.

The procedure for getting these permits differs based on factors like location and type of work planned. Detailed proposals outlining your intentions need to be submitted, which are then scrutinised by relevant departments within the council. Information about applying for planning permissions across England and Wales can be found here.

Ensuring Compliance with Local Regulations
Beyond acquiring necessary repair licenses, ensuring compliance with local regulations is another critical aspect when dealing with an unmortgageable scenario. These rules might include building codes explicitly related to safety standards, such as fire protection measures or accessibility requirements.

Flouting these guidelines may lead to severe consequences, including financial penalties and remedial works orders.


Buying an unmortgageable property can be a challenging yet rewarding venture. Understanding the reasons behind a property's unmortgageable status and carefully evaluating potential risks and rewards.

However, it's essential to know the legal implications of owning an unmortgageable property.

Obtaining necessary permits for renovations and ensuring compliance with local regulations is vital to avoid legal issues. The guide has provided the intricacies of how to buy an unmortgageable property, ensuring that investors can make an informed decision.

We're experienced financial experts who arrange short-term bridging loans for property owners, securing you the best deal from over 200 bridging loan providers, including private investors and family offices.

Get expert assistance today; we're on hand to answer any questions about bridging loans.

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Buying an Unmortgageable Property FAQs

What happens if a property is unmortgageable?

If a property is deemed unmortgageable, it simply means traditional lenders won't provide finance due to perceived risks. However, this doesn't prevent you from purchasing the property through alternative financing methods.

How to get a mortgage on an unmortgageable house?

Securing mortgage finance on an unmortgageable house can be challenging but not impossible. Options include bridging loans or securing private investors willing to take on higher-risk investments.

Do you pay stamp duty on an unmortgageable property?

In most cases, yes. Stamp duty applies irrespective of whether the property is mortgageable or not. The rate depends upon the purchase price and other factors, such as your status as a first-time buyer.

Can I buy a property without a deposit?

No-deposit mortgages are rare and usually require guarantors. Generally, buying property requires an upfront payment or deposit.

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