What you should know about getting a mortgage on a high rise
If you're looking to benefit from city centre living, buying a top-floor flat may offer great views and a 'penthouse' lifestyle. However, it can be notoriously difficult to get a mortgage on a high-rise flat, particularly if you are looking to buy on one of the upper floors of a tall building.
Our guide tells you everything you need to know about getting a mortgage on a high-rise apartment.
Why getting a 'high-rise mortgage' can be hard
Getting a mortgage on a high-rise flat can be tough. There are very few lenders who will consider lending against any apartment in a property that is over six or seven storeys high, particularly if you're looking to buy outside London.
Even if you're looking at a buy-to-let you will find that many lenders simply won't consider a high rise flat.
There are three main reasons why lenders are reluctant to consider this type of property:
1. New build scars
In the early to mid 2000s, thousands of new build apartment blocks were built in major cities across the UK. Many of these flats were sold to buy-to-let investors, buying off-plan for discounts expecting to let the properties for a substantial profit. However, as the credit crunch hit, many investors found themselves without a tenant and unable to pay their mortgage. Prices collapsed and many lenders suffered substantial losses, making them reluctant to lend now.
2. High rental occupancy
Many new developments have a large proportion of rental occupancy. Without a large number of owner-occupiers, blocks can quickly fall into a poor state of repair and maintenance levels can be low.
Steve Goodall, managing director at Legal and General Surveying Services, says: "This can then lead to an adverse impact on values and re-sale prospects. As with any emerging trend in construction, there is a nagging concern that with so many new towers and flat developments currently in the planning system, the market might eventually tip into over-supply."
3. Ex-local authority flats
Lenders are reluctant to agree mortgages on high rise apartments in ex-local authority blocks, mainly because they have concerns about the re-sale value of these homes. Mr Goodall from L&G adds: "Ex-local authority large panel high-rises of typically more than 20 storeys remain a problem for the majority of lenders and many make blanket restrictions that impact newer private modern blocks in prime areas as a result."
Typically, lenders will lend on apartments up to a certain floor. Other lenders will consider a loan on a high rise flat but these will always be subject to the valuer's comments. A lender will generally want to see that:
- there is a high level of demand from owner-occupiers
- the condition of communal areas is good and that lifts etc. are working
- there is likely to be a demand when the flat is sold
Another problem occurs in situations where only a restricted number of lenders will grant a mortgage. Here, it may be tough to get a loan if these lenders have already lent against multiple properties within the same development.
High-rise flats in London likely to be easier to mortgage
You may also be more likely to get a mortgage on a high rise apartment if you are buying in London. Mortgage expert Andrew Montlake says: "Most of the new developments in London, even those that are 20 storeys and above, do not pose many issues for lenders.
"But outside of London some lenders do have concerns, especially as in their opinion these types of units are the first wave of properties to lose their value in the event of a downturn."
As more and more high-rise blocks are built, lenders are trying to be more flexible. A spokesperson for Santander told the Daily Mail: "We recognise that as the population grows, cities get more saturated. There is a well-recognised shortage of housing in the UK, meaning people are starting to build up rather than out.
"We want to support all customers get a foot on the housing ladder, whatever type of property and wherever they are. In cities like London, we can and do go over seven storeys, subject to a valuer report. I think lenders' propositions will evolve with that of the skyline, so anticipate in the next few years we will see more lenders becoming more flexible."