Topic 13 Flashcards
Assessing the property (49 cards)
What basic property information must a lender obtain during a mortgage application?
Address/location, purchase price, property type, tenure, number/type of rooms, whether vacant possession is available, proposed alterations, proposed use, builder details (and NHBC status), inspection arrangements (for self-builds), and expected rental amount (for BTL).
Why is vacant possession important to a lender?
Because the presence of tenants can reduce the property’s market value, unless it’s a buy-to-let application.
What are the legal title requirements for a mortgage lender?
The vendor must have clear title to the property; disputes or defects in title can devalue the property or make it unsaleable.
What is a sitting tenant, and how can it affect a mortgage?
A sitting tenant has a protected tenancy not classed as an AST (Assured Shorthold Tenancy). Their legal protection can devalue the property and deter lenders from offering a mortgage.
How can disputes impact a property’s value?
Disputes over boundaries, trees, access, or noise may threaten property value or cause the sale to fall through.
What is a flying freehold, and why might it be a problem?
It’s a freehold where part of the property overhangs another. It can complicate responsibility for repairs and reduce lender interest.
Why do lenders typically avoid freehold flats?
Because shared structures like ceilings and floors lack clear ownership/responsibility, making repair and insurance complex.
What problems can arise with leasehold tenure?
Restrictions in the lease, short lease terms, concerns about former local authority flats, and rising ground rents can all impact value and mortgageability.
What leasehold issue led to many lenders refusing mortgages on certain properties?
Excessive ground rents that doubled every 10 years and high fees for permission to make changes.
What change is proposed in the Leasehold and Freehold Reform Bill regarding new build houses?
It bans the sale of leasehold new build houses.
Why is the remaining lease term significant to a mortgage lender?
A diminishing lease term reduces the lender’s security value. Lenders typically require at least 30–80 years remaining beyond the mortgage term.
What is ‘marriage value’ in leasehold terms?
It’s the added value when a lease under 80 years is extended; the freeholder is entitled to 50% of this added value.
How will the Leasehold and Freehold Reform Bill affect marriage value?
It will abolish the requirement to pay marriage value when extending a lease.
What change does the Reform Bill propose regarding leaseholder eligibility for extension?
Leaseholders will no longer need to own the lease for two years before extending it.
How can a short lease be made acceptable to a lender?
The current owner serves a statutory notice to extend, transferring the rights to the buyer, who can then complete the lease extension.
What are the cost components of extending a lease?
Loss of ground rent, delayed reversion to freeholder, and 50% of the marriage value.
How does geographical location affect property value?
Areas of economic prosperity attract population clusters that drive up demand and property prices (e.g., London and the south-east). Even within towns, the area name or postcode can influence value due to perceived desirability.
Can sparsely populated areas have high property prices?
Yes, if the area is exclusive or desirable, limited supply can result in higher prices despite lower population density.
How does the type of property affect its value?
Generally, flats are worth less than houses; detached homes are worth more than semi-detached or terraced. Bungalows can be more expensive due to limited supply and appeal.
What is the lender’s concern with properties that have a limited market?
If resale potential is poor, especially in a forced sale, the property may not offer adequate security, making it less valuable to the lender.
Why are retirement apartments often harder to sell?
They appeal to a limited market and usually have high service charges, which can deter buyers.
How does the age of a property influence its value?
Period properties in good condition may carry a premium. However, if such properties are common in the area, the premium may reduce.
What impact does the condition of a property have on its value?
Properties in good condition typically sell for higher values. Poor condition may reduce value, but may also present an opportunity to add value through improvements.
How might a property’s condition influence lending decisions?
If the buyer intends to refurbish the property, lenders may consider a higher loan amount if post-improvement value is expected to rise.
