Mortgage on grade 2 listed building (3 useful tips)
What does a grade 2 listed building mean?
Prospective mortgage borrowers always wonder if they can get a mortgage on a grade 2 listed building.
A grade 2 listed building is a building that is of special interest warranting every effort to keep it and retain its structure.
You can buy a grade 2listed building in the UK and get a mortgage for it but as mortgage lenders are more interested in their ability to resell the property at the price it was bough if they have to do a home repossession you will find that many mortgage lenders end up rejecting grade 2 listed buildings automatically without analysing them further.
As grade 2 listed buildings fall in the same basket as non-standard construction property you should take special care when going about applying for a mortgage on a grade 2 listed building.
Listed buildings cannot simply be renovated. You must get permission from the council before you make any adjustments on a listed building.
The cost of maintaining a listed building is also significant and can be a big factor which affects your mortgage affordability.
Can you get a mortgage on a Grade 2 listed building?
The short answer is yes, you can get a mortgage in a grade 2 listed building. In reality, most mortgage lenders who lend on grade 2 listed buildings will decide whether to lend or not on a case by case basis and so there isn’t really a one fit all approach.
As far as the National Heritage List for England has named as the building as being a being of specific historic or architectural interest, it will need to be maintained and protected by law.
Mortgage lenders who lend on grade 2 listed buildings will be especially interested to see the valuation report and get an idea of what the maintenance costs could also be on the grade 2 listed property.
get a grade 2 listed property suveyor
An important factor when looking to get a mortgage on a grade 2 listed building is the property surveyor you use. A property surveyor with experience of grade 2 listed buildings may be able to provide you advice which helps you get a mortgage on the grade 2 listed buildings in contrast to one without specialist knowledge who could end up costing your the mortgage on your grade 2 listed building.
What mortgage deposit will you need for a mortgage on a grade 2 listed building?
The mortgage deposit requirement on a grade 2 listed building will differ significantly from one mortgage lender to another.
Mortgage lenders who offer mortgages on grade 2listed buildings will usually expect mortgage deposits of around 25% but you may be able to find mortgage lenders who will accept a 10% mortgage deposit for a mortgage on a grade 2 listed building.
Restrictions on Grade 2 listed buildings
Some grade 2 listed buildings may have restrictions which your conveyancer may be able to find and in any case, should be declared by the seller. These restrictions or covenants could break a mortgage offer and cause it to be withdrawn.
What are the different grades of property and how do they affect your ability to get a mortgage?
The different grades of property can affect your ability to get a mortgage mostly due to the structural concersns, resale value and maintenance costs involved. The grades include:
Grade I listed buildings
Grade l listed buildings are the most vital and important to national heritage. They are termed as“buildings of exceptional interest”. These buildings will likely have the highest maintenance costs and will likely have aged the most and might already be deteriorating.
They may no longer be habitable and their resale values will likely be falling.
It may be difficult to get a mortgage for grade1 listed buildings but there are specialist mortgage lenders out there who may be willing to lend to you.
Grade II* listed buildings
Grade II* listed buildings are the in-between category. They are much more prominent than Grade I listed buildings although the maintenance costs will still be just as high. Grade II* listed buildings are termed as “buildings of particular importance, of more than special interest”.Grade II listed buildings are much more mortgageable than Grade I listed buildings but you may struggle to find mortgage lenders without the help of a specialist mortgage broker.
Grade II listed buildings
Grade II listed buildings are buildings which are the most common out of the listed buildings. 92% of listed buildings fall under this category.
It is relatively easier to mortgage this type of property but the maintenance costs are still considered high in comparison to a standard home.
These properties are termed as “buildings that are of special interest, warranting every effort to preserve them”.
In Scotland, the listing system is slightly different. It goes like this:
Buildings of national or international importance, either architectural or historic; or fine, little-altered examples of some particular period, style or building type.
Buildings of regional or more than local importance, or major examples of some particular period, style or building type, which may have been altered.
Buildings of local importance, lesser examples of any period, style or building type, as originally constructed or moderately altered, and simple, traditional buildings that group well with other listed houses.”
The listed building system is the same for Northern Ireland but are graded A, B+, B1 and B2.
What loan to value rates can you expect on a Grade II listed building?
Due to the increased risk exposure mortgage lenders believe they can expect from Grade II listed buildings they will usually look to offer loan to value rates of 75%. In some cases, you may find mortgage lenders who will offer even smaller loan to value rates on Grade II listed buildings but you may also find mortgage lenders who are willing to offer as much as 90% loan to value rates.
You can also expect to find a similar loan to value rates for Grade I and Grade II* properties.
Government schemes for listed buildings?
Unfortunately, you won’t be able to use any government scheme if you intend on getting a mortgage on a listed property as most government schemes may request property of standard construction.
What does insurance cost on a Grade 2 listed building?
The cost of insurance on a grade 2 listed building will hugely differ based on the buildings unique features.
Getting insurance for a grade 2 listed building may be very difficult and if you do indeed find one it may not be at competitive rates. The reason why getting insurance on grade 2 listed buildings is much more difficult is because the structural characteristics of the building, its age and its rebuild costs all add for a confusing mix.
Most mortgage lenders who offer mortgages in grade 2 listed buildings will insist that you get an insurance quote first before they will offer you a mortgage.
You may be able to get an insurance quote fro a grade 2 listed building with the help of a specialist insurance broker.
Can you get a mortgage on a grade 2 listed building with bad credit?
Getting a mortgage on a grade 2 listed building with bad credit may be difficult as mortgage lenders may usually want to lend to borrowers who have a good credit score and have shown a good repayment history on all their previous debts and credit obligations.
There are however mortgage lenders who will offer a grade 2 listed building mortgage to a borrower depending on what type of bad credit was and what the circumstances were.
If it was a CCJ which was satisfied and is a certain age then some 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 grade 2 listed building.
Bad credit could include:
A debt management plan
A home reposession
Can you get a mortgage on a grade 2 listed building if you are self-employed?
Getting a mortgage on a grade 2 listed building if you are self-employed is certainly possible but most mortgage lenders may want to see your accounts for 3 years at the very minimum although there may be mortgage lenders willing to offer a mortgage on a grade 2 listed building if the self-employed borrowers have less than 3 years worth of accounts but at least 12 months.
The documents you may need as a self -employed mortgage borrower include:
Your SA302 tax calculation form
Your company accounts if you work through a limited company
Your bank statements for the past 3 months
You may find using the services of a mortgage broker who has experience dealing with self-employed borrowers.
Other considerations a mortgage lender may take into account when offering a mortgage on a grade 2 listed building to a self-employed are:
The Trading style: are you drawing a salary from a company or do you have a claim over a share of retained profits. These could make a significant difference in how much you may be able to borrow.
Your experience: how long have you been self-employed and what is your working history.
Should I buy a Grade 2 listed building?
The decision on if you should buy a grade 2 listed building should focus mainly on your mortgage affordability for a grade 2 listed mortgage. Remember due to the high maintenance costs your monthly costs may be much higher when you own a grade 2 listed building. Your monthly insurance premium costs may also be much higher.
Do you need listed building consent for internal alterations?
You may be required to get listed building consent before making any internal alterations on your listed building and you may want to also seek legal advice on this.
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.