Non-Standard Construction Mortgage

Non-standard constructions have been on the rise in the UK, with a 28% market share held by timber frames alone as of 2018 when it comes to property construction.

The difference in the integrity of a standard brick-and-mortar construction and that of a timber or steel frame non-standard construction is quite significant. 

Because of this difference, the available lenders offering mortgages for a non-standard construction are notably different from those of a standard construction in certain cases.

If you’re eyeing a house with non-standard construction to be your forever home, the importance of understanding how a non-standard construction mortgage works can’t be understated. 

There is a significant number of unusual pieces of criteria associated with these mortgages, knowing which is critical before sealing the deal.

What Is A Non-Standard Construction Mortgage?

Non-standard construction mortgages are designed for properties with unconventional build materials such as timber and steel frames.

Here, “non-standard” refers to the reduced use of or a complete lack of brick and mortar or stone and tiles while building a structure.

Timber and steel frames are the most common non-standard construction materials, but the term “non-standard” covers a range of different materials and building types. 

In general, non-standard constructions include the following:

• Concrete
• Thatched roof
• House with modular elements or prefab house
• Flats in a high-rise building
• Listed buildings
• Flat roofs
• Barn conversions

Every mortgage lender will complete their own mortgage valuation of the property and complete relevant checks before approving a loan. 

For non-standard constructions alongside all property types realistically, you can expect the lender to conduct a survey of the property during the application process.

How Does Non-Standard Construction Mortgages Work?

The application processes for non-standard construction property mortgages share similarities with applications for standard construction mortgages, with a few key differences to be mindful of.

Like with standard mortgages, the routine processes for non-standard construction mortgages include affordability checks, proof of income, credit history, and personal circumstance checks.

These checks are a part of the application procedure to ensure that you will be able to pay the loan amount back without risking a loss.

Where non-standard construction mortgages differ is that mortgage lenders view such constructions to be of high risk. 

Owing to the perceived risk, you may be required to pay a larger deposit amount, a higher interest rate or be subject to stricter affordability checks. In some cases, you may have to face any combination of these three conditions.

With non-standard construction mortgages come property surveys, which have costs of their own. The mortgage lender may require you to handle the entire structural survey process as well, from hiring to handling the bill. 

As you may have noticed already, this can get quite expensive, especially if you are required to pay a higher deposit with a high interest. 

Whether this proves to be fruitful or not depends entirely on the results of the survey. If the survey reports no security risks, the lender may approve your loan. 

However, if the comments include potential risks like fire risk or structural weakness, the lender may reject your application.

Different lenders’ criteria can vary greatly on this. 

Why Is It Difficult To Get A Non-Standard Construction Mortgage?

1. High Maintenance Requirements

Properties with non-standard construction are perceived to be high risk because of the differences in maintenance when compared with standard construction. 

Non-standard construction properties often require high maintenance to keep them in prime shape as for example structural complications may result in ongoing work to be required to be completed to the property. 

The idea of the borrower leaving the house prematurely because of a structural issue is the primary reason why non-standard construction mortgages are difficult to get.

2. Resale Difficulties

Let’s consider a realistic scenario of a non-standard construction being repossessed by the mortgage lender. Now, the lender must put the house up for sale and pour more resources into the resale to ensure that buyers consider it as a legitimate option. 

Selling a house is a lengthy and tedious process, with certain properties taking several years to find a suitable buyer. 

The relative lack of demand for non-standard homes further complicates this process, as they tend to be costlier than conventional homes. Sometimes, the resale does not end up recouping their losses, morphing into an unexpected money sink for the lender.

Mortgage lenders lend money for the express purpose of making more. If an investment has the potential to harm them in the long run, it’s only natural that they try to minimise their losses. 

That’s why lenders may ask for higher interest rates or deposit amounts when lending money to prospective borrowers for homes with non-standard construction because of these potential future issues. 

3. Difficulties With Insurance

Insurance providers have a mindset similar to that of mortgage lenders when it comes to non-standard homes. 

As such, it’s common to see unfavourable terms being offered for a house made with unconventional building materials.

Mortgage lenders prefer when the property being mortgaged can reliably get insurance for emergencies. 

One way potentially of getting insurance for a non-standard property is to find a specialist insurer. 

Enlisting the help of a specialist insurer will get you information about the market while providing you insight into the best deals possible.

However as earlier mentioned, lenders will factor in whether it is difficult to get suitable insurance before agreeing to make an offer

Non-Standard Construction Mortgage Eligibility Criteria

There are three main criteria to fulfil in order to get a mortgage for a non-standard construction property successfully: deposit requirements, property type and condition, and credit history/affordabiltiy.

1. Deposit Requirements

When discussing mortgages on the market, standard mortgage deposits hover around 20% of the property value. 

Note that there are a lot more options open to standard mortgages, including deposits ranging between 5% and 10% in most cases. 

For non-standard buildings, this requirement can be significantly higher, but it is mostly dependent on the lender’s willingness to offer a loan at all. 

You can expect non-standard mortgage deposits to start at 25%, with some lenders asking for an amount as high as 40%.

Once again this will be very lender dependent. 

2. Property Type And Condition

Lenders typically require a property survey for non-standard construction properties to understand the type of home you are requesting a loan for. 

This is to help them gauge the property value and assess whether the house will face issues in the future or not.

Once the survey is completed, lenders will prepare loan terms based on the type of property and the condition it is in. 

Leasehold properties, in particular, will have minimum lease term requirements for non-standard buildings.Other requirements may include service charges and ground rent, with the ESW1 form required specifically for high-rise flats.

3. Credit History/affordability

Your credit history/affordability will also play a role for the success of your mortgage application.

Being an indication of how timely you pay off bills and other payments, credit history is required to be included in your application.

Unpaid or late payments reflect poorly on your credit score, and if your credit score is too low, you may be considered a high risk borrower. 

Combined with the high risk of non-standard properties, the possibility of the lender rejecting your application skyrockets with a sub-par credit score. And upon rejection, you may have to look for specialist lenders willing to offer bad credit mortgages.

So, it’s imperative for you to ensure that your credit score is at least in the “good” range (700-749) before applying for a mortgage for the best deals.

Alongside this you have to show you meet the affordability criteria also to borrow the requested loan amount. 

Frequently Asked Questions

1. Can a non-standard property be transformed into a standard one?

A non-standard property can be transformed into a standard property, provided that you replace or reduce the amount of non-standard materials being used. For instance, you can consider renovating a flat roof with tiles to make it more mortgageable.

2. What are the alternatives to non-standard construction mortgages?

There are a fair number of alternatives to seek if you can’t find a suitable mortgage deal, such as bridging loans and flexible construction loans. Whether these options are available to you or not depends on the property condition, renovation plans, and ownership duration.

The above are only suitable for certain specific circumstances. 

Final Thoughts

With the increase in non-standard construction, getting a mortgage for your property is getting easier. 

There are a few things that you need to be mindful of to have a good chance at a successful application. 

Aspects of a non-standard buildings, such as the property type and condition and deposit requirement, can make it more difficult to find a suitable deal.

But with the help of an experienced broker and a little vigilance on your part, you can secure the right mortgage in no time.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.