Purchasing a property at auction is an exciting opportunity, especially for buyers interested in renovation projects. Non-habitable properties can sometimes qualify for different Stamp Duty rates, offering potential savings. Mortgage Knight explains financing options for non-habitable properties and what buyers need to consider about SDLT classifications.
What Is a Non-Habitable Property?
A property is generally considered non-habitable if it’s unsuitable for immediate residential use. This could mean it lacks basic facilities such as a working bathroom or kitchen, safe structural integrity, or functional heating and plumbing systems. Because these properties are not immediately livable, they often fall under different classifications for tax and mortgage purposes.
Why Non-Habitable Properties May Qualify for SDLT Relief
When purchasing a non-habitable property at auction, buyers may find that the property qualifies for non-residential SDLT rates. This can lead to tax savings, as non-residential properties typically incur lower SDLT than standard residential purchases.
Mortgage Financing Options for Non-Habitable Properties
Mortgage lenders often have different criteria for non-habitable properties. As these properties require significant renovations before they’re suitable for residential use, buyers need a mortgage product that suits these conditions. Here’s an overview of financing options for non-habitable properties:
Bridging Loans for Auction Purchases
Quick Access to Funds: Bridging loans are a popular option for auction properties, especially non-habitable ones, as they provide quick access to funds. With fast approvals, bridging loans allow buyers to secure auction properties and cover initial renovation costs.
Short-Term Loan Structure: Typically, bridging loans are short-term, meant to cover the time until the property is renovated and refinanced with a standard mortgage. This makes them ideal for non-habitable properties needing significant work.
Renovation Mortgages
Covering Both Purchase and Renovation Costs: Renovation mortgages can provide funds for both purchasing and upgrading a non-habitable property. These mortgages are often flexible, allowing buyers to use funds for essential improvements to make the property livable.
Staged Payments Based on Project Milestones: Renovation mortgages sometimes offer staged payments, where funds are released as renovations progress. This can be helpful for buyers tackling large renovation projects, as funds align with each stage of work.
Standard Buy-to-Let Mortgages Post-Renovation
Refinancing After Renovation Completion: Once a non-habitable property has been renovated and deemed livable, it may qualify for a standard buy-to-let mortgage. This allows investors to convert their short-term renovation financing into a longer-term mortgage, using rental income to support repayments.
Preparing for Rental Income: If the goal is to rent out the property, buyers should consider market rental values in the area to ensure the property can generate sufficient rental income for long-term mortgage affordability.
Benefits of Financing Non-Habitable Properties at Auction
Access to Unique Investment Opportunities
Non-habitable properties often come with lower purchase prices due to the repairs required, making them ideal for buyers looking to add value.
Potential for High Return on Investment
With strategic renovations, non-habitable properties can be transformed into high-value rental properties or sold at a profit.
Opportunity to Benefit from SDLT Relief
If the property qualifies as non-residential, buyers may see savings on SDLT, though this depends on the property’s condition and classification.
Flexible Financing Options for Quick Action
Auction properties often require fast financing, and bridging loans and renovation mortgages offer buyers the flexibility to act quickly.
Path to Long-Term Income
Once renovated, non-habitable properties can be turned into long-term rental investments, providing consistent income.
Why Choose Mortgage Knight for Financing Non-Habitable Properties?
Mortgage Knight specialises in connecting buyers with lenders who understand the unique needs of non-habitable property purchases. Whether you’re purchasing an auction property or planning a renovation project, we help you find financing that supports your investment goals. Contact us today for expert advice on mortgage options for non-habitable properties.
Frequently Asked Questions
Q: Can I use a standard mortgage for a non-habitable property?
A: Standard residential mortgages typically require the property to be livable. However, options like bridging loans or renovation mortgages can finance non-habitable properties until they’re upgraded for long-term financing.
Q: What if I want to live in the property after renovations?
A: Once the property is habitable, you may refinance to a residential mortgage if you plan to live in it. Mortgage Knight can help with refinancing options based on your future plans.
Q: Do all non-habitable properties qualify for SDLT relief?
A: SDLT classification depends on the property’s condition at the time of purchase. For specific tax advice, we recommend consulting with a tax advisor or solicitor.
Q: Are there additional costs to consider for non-habitable properties?
A: Yes, non-habitable properties often require significant repairs. Buyers should budget for renovation costs, building surveys, and additional fees associated with short-term financing options like bridging loans.
Q5. What documentation do I need as a contractor?
Ans: Documentation requirements vary by lender, but typically include recent contracts, bank statements, proof of address, and identification. Some lenders may also request business accounts, CV, or other supporting information. We guide you through each lender’s specific requirements.
Q6. Can you help if I've been rejected elsewhere?
Ans: Yes, we can review your situation and potentially identify alternative lenders who may take a different view. However, it’s important to understand why the previous application was unsuccessful and whether your circumstances need to change before reapplying.
Professional Contractor Mortgage Guidance
If you’re a contractor looking for professional mortgage guidance, we’re here to help. Our specialist knowledge and lender relationships enable us to provide expert advice tailored to your situation.
Schedule your consultation today. We’ll discuss your circumstances, explain your options, and provide honest advice about the best approach for your contractor mortgage application.
