Property types
We'll consider lending you money to buy different types of old and new property, purpose-built flats or conversions, or a property you're buying outright or under an approved shared ownership or shared equity scheme. We'll also consider an application to buy a property that you want to rent out to someone else. We may ask you to provide a bigger deposit on some types of property than others. Any loan we make is subject to a property valuation.
Freehold
If the property is freehold, then you will own the property and the land it’s built on. We don't lend on freehold flats in England and Wales or Northern Ireland.
Leasehold
If the property is leasehold, then you will own a temporary right to occupy the property and the land it’s built on. The property and the land are owned by someone else and they lease them to you for a number of years. Leases can last for decades or centuries. There is usually an annual charge for the lease, called a ground rent and sometimes there may also be service charges. We'll only lend on leasehold properties with at least 70 years left on the lease when you apply. Before you buy, your conveyancer will check the lease terms to make sure they are acceptable.
In Scotland (except in rare cases where there is a form of long lease known as a 'tack') all properties are owned outright by the 'registered proprietor'.
Self-build
We currently only offer this type of mortgage if you are applying through a mortgage broker. We usually release self-build mortgages in five instalments, as the work progresses. You apply at the end of each stage for an instalment. We ask a valuation surveyor to value the property each time you ask for an instalment. You must provide a copy of the final inspection report and completion certificate and complete the build within two years of the first release of funds.
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Example:
Estimated value of finished property: £260,000
Cost of construction: £120,000
Total loan amount: £169,000 (65% of £260,000)Worked example
Stage
Action
Valuation
Maximum amount we will release
Total Maximum Loan
Stage
1
Action
Land bought for £100,000
Valuation
£100,000
Maximum amount we will release
£75,000
Total Maximum Loan
£75,000
Stage
2
Action
Footings and foundations complete
Valuation
£120,000
Maximum amount we will release
£15,000
Total Maximum Loan
£90,000
Stage
3
Action
Walls constructed
Valuation
£160,000
Maximum amount we will release
£30,000
Total Maximum Loan
£120,000
Stage
4
Action
Roof on
Valuation
£220,000
Maximum amount we will release
£32,100*
Total Maximum Loan
£152,100
Stage
5
Action
Completion
Valuation
£260,000
Maximum amount we will release
£16,900
Total Maximum Loan
£169,000
*At stage 4, although 75% of the interim value would enable £45,000 to be released at this point, 10% of the loan will be retained until the property is fully complete.
Any builder you use to build your property must be registered with an acceptable Building Standards indemnity scheme, or the construction must meet our current monitoring requirements.
You'll need specialist insurance during the construction. You must seek advice from an insurance specialist on this.
New-build or converted properties
A new property or a property that has been built or converted within the last ten years should be part of a Building Standards indemnity scheme. This gives a ten-year warranty against material defects. There are a number of acceptable schemes, but the main one is run by the National House-Building Council (NHBC).
We'll consider lending on a property that is not part of one of these schemes if it comprises of a development of no more than 15 properties and meets our current monitoring requirements.
Shared equity
This can take various forms. Usually you own 100% of the property but pay a reduced amount to the builder, for example 75% of the property value. You own 100% of the property so there is no rent to pay. The builder holds a 25% stake in the property and registers this interest in your property at the Land Registry. At a later date, when you can afford to, you can buy the remaining 25% from the builder at a cost of 25% of the value of the property at that time. If you decide to sell the property, you must give the builder 25% of the sale proceeds.
Shared ownership
Shared ownership schemes are usually offered by registered social landlords or local authorities. With this type of purchase you buy a share of a property, say half, and pay a reduced rent for the rest to the registered social landlord or the local authority. The share you first buy may be as little as 25%, but if you wish you may be able to buy more shares later until you own the property outright.
Right to Buy
If you rent your home from your local authority or a registered social landlord, you may have the Right to Buy your home under certain conditions set out by your landlord. You may be able to buy your home at a discount to its market valuation. The discount is usually based on the property value and how long you've been a tenant.
Buy to let
A buy to let mortgage is a loan you can take out to buy a property that you intend to rent out to tenants. The most you can borrow is linked to the amount of rental income we think you could earn. Taking out a mortgage is one of the many risks of investing in buy to let properties. So before you enter the market you should be an experienced house buyer and have fully researched investment properties. These mortgages aren't available to first-time buyers or applicants under the age of 25. At least one person named on the loan must currently own a property in the UK.
To get an idea how much you could borrow on a Buy to let mortgage, visit our mortgage calculator.