Mortgage on a studio flat (A 3 point guide)
In this brief blog, we will discuss getting a mortgage on a studio flat and what you should consider.
Can you get a mortgage on a studio flat?
Yes, you may be able to get a mortgage on a studio flat as studio flats are considered residential dwellings. This means you can get a residential mortgage on a studio flat.
You may also be able to get a buy to let mortgage on a studio flat.
For flats which are located inside apartment blocks or an apartment complex, the mortgage lender will want to know if the property will be able to be resold at an optimal price before they repossessed it and will look at comments from the surveyor and value for this.
What are the eligibility requirements for a mortgage on a studio flat?
To get a mortgage on a studio flat you will need to meet the mortgage affordability requirements of most residential mortgages.
You will need to put down a mortgage deposit to get your studio flat. Most residential mortgages now offer a mortgage deposit of around 5% but to get a better mortgage rate you may want to put down a larger mortgage deposit.
You may also be struggling to save up your 5% mortgage deposit but there are first-time buyer and home mover government schemes which may be able to help you buy your studio flat.
These first-time buyer schemes work by increasing the amount of mortgage deposit you have or reducing the total cost of the studio flat.
If you want to get the first-time buyer schemes as a first-time buyer then you will likely have to sign a first-time buyer declaration.
The first-time buyer schemes include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save a maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy– allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire– similar to the above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
Your credit score and history
Your credit score and history are very important when looking to get a mortgage on a studio flat.
Most mortgage lenders will expect to see that you have a good credit score, you are registered on the electoral roll and that you have kept up on any monthly credit repayments which you have to make.
You should always check your credit score from all four credit bureaus(crediva included) to be sure there are no errors on your credit file before you apply for a mortgage on a studio flat.
You can use a service like checkmyfile to get your credit score and history from all four credit bureaus then if you are satisfied with everything you see you can go on to confidently apply for a mortgage on a studio flat.
If the studio flat you want to buy is a non-standard construction flat then you may find that your choice of mortgage lenders will likely be limited. Buying a standard construction property will increase the amount of mortgage lenders you have available to you and give you a better chance of getting a mortgage on a studio flat.
Your income is a very big factor when deciding if you can afford a mortgage on a studio flat.
Most mortgage lenders will want to see that your monthly disposable income can cover the monthly mortgage repayments on your studio flat mortgage as well as have some room for you to still be able to take care of any financial emergencies that may happen.
size and design of the flat
Some studio flat mortgage lenders will not offer a mortgage on a studio flat if the size of the studio flat is less than 30 square metres and if it has a design that they are not happy with.
Most studio flat mortgage lenders will want the kitchen to be separated from the living area.
Most studio flat mortgage lenders will not lend to borrowers who will be more than 75 at the end of the mortgage term. If you want a mortgage on a studio flat and will be more than 75 by the time the mortgage ends then you may still be able to get a mortgage but you may need the help of a specialist mortgage broker
Flats will usually have ground rents and other associated costs. If the mortgage lender feels you won’t be able to afford these costs in the long run then they may not offer you a mortgage on the studio flat.
Nearby commercial property
If the flat is located above a shop then you may struggle to find studio flat mortgage lenders who will offer you a mortgage due to the foot traffic, noise and risk of fire caused by having commercial buildings around your studio flat. The studio flat mortgage lender will also be concerned with their ability to resell the studio flat if they have to reposses your home.
The construction and height of the building
If the flat has more than 7 storeys then you may again find your choice of mortgage lenders is limited, this will also be the case if the flat has unusual construction materials(non-standard construction) or doesn’t have access to a lift. If these are the case with you then you may still be able to get a mortgage on a studio flat but may need the help of a specialist mortgage broker.
Most studio flat mortgage lenders will not lend on a property which has less than 70 years left on the lease. This is an important factor which you should take into account when shopping for a studio flat and looking to get a mortgage on a studio flat.
Studio flat mortgage lenders are concerned about this because if they had to repossess the property from you then selling it with a shorter lease term may be difficult as they won’t be able to get a reasonable price for the studio flat.
How much mortgage deposit do you need to get a mortgage on a studio flat?
The mortgage deposit you will need for a mortgage on a flat will depend on your personal circumstances but you should usually be able to get a mortgage on a flat with a mortgage deposit of around 5%.
If you are struggling to save up a mortgage deposit for your studio flat mortgage then you may also be able to use a guarantor mortgage which may require no mortgage deposit at all.
Your family and friends could also potentially provide you with a gifted mortgage deposit and a gifted deposit letter to accompany it.
Mortgage lenders aren’t all keen on gifted deposits and will usually insist that the gift is from a member of your immediate family. They will also want to review the contracts and gift to ensure that it isn’t a loan which may challenge their first charge mortgage on your studio flat if they ever have to repossess your home.
Aside from a gifted deposit, you may also be able to use a family deposit mortgage to get a mortgage on a studio flat.
Family deposit mortgages are also know as the family springboard mortgage, they include mortgages from lenders such as the Barclays family springboard mortgage, the lloyds lend a hand mortgage or the post office family link mortgage.
Can you get a mortgage on a studio flat with bad credit?
Getting a mortgage on a studio flat with bad credit may be difficult as mortgage lenders may usually want to lend to borrowers with good credit scores and have shown a good repayment history on all their previous credit commitments.
There are however mortgage lenders who will offer a mortgage on a studio flat to someone with bad credit but this will usually be based on the individual circumstances and doesn’t guarantee that everyone with bad credit will be eligible for a mortgage on a studio flat.
If it was a CCJ which was satisfied and is a certain age then some studio flat mortgage lenders may be willing to lend.
Other mortgage lenders may lend if the CCJ was a maximum amount.
When looking to get a mortgage with bad credit the requirements from different mortgage lenders will differ and a bad credit mortgage broker may be able to assist you in getting a mortgage on a studio flat.
When considering studio flat mortgages, bad credit could include:
A debt management plan
A default(including a mortgage default)
A home repossession
Missed credit repayments
Late credit repayments
Can you get a mortgage on a studio flat if you are self-employed?
Yes, you may be able to get a mortgage on a studio flat if you are self-employed but you may need to go through greater lengths to satisfy the mortgage lender of the reliability of your income.
Any long gaps of unemployment will also not be looked at kindly as this may indicate to the mortgage lender that you struggle to find jobs.
The documents you will need for a mortgage on a studio flat as a self-employed borrower include:
Your SA302 tax calculation form if you are self-employed
Bank statements for at least 3 months
Yourself employed or company accounts.
Is there a minimum square footage for a mortgage?
Yes, some mortgage lenders will not lend on properties with less than 30 square metres. If the property you want to buy is small and you are concerned about this then you ma want to speak with a mortgage broker who may have some experience of lenders willing to accept properties which are small.
Can I get a mortgage on a studio flat for buy to let (BTL)?
Yes, there are mortgage lenders who will offer a buy to let mortgage on a studio flat but you can expect tighter requirements and a larger mortgage deposit requirement.
How to get a mortgage on a studio flat?
If you are looking to get a mortgage on a studio flat then you may want to speak to a mortgage broker who may be able to advise you on all the mortgage options available to you.
Mortgage brokers have some advantages than going to mortgage lenders directly as they may be able to compare thousands of mortgage products from hundreds of mortgage lenders to ensure you get the best mortgage on your studio flat.
Use a mortgage broker for your mortgage in principle
You may want to use an independent mortgage broker to help you get a mortgage on your new home.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.
This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application.
This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.
It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.
They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.
This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.