Securing a mortgage on a ‘high-risk’ property

Climate change could influence your mortgage application as many lenders now assess the risks of climate change’s impacts when determining whether to approve a loan against a property. Factors such as flooding, coastal erosion, landslides, and subsidence or sinkholes are increasingly considered by lenders.

The UK’s Environment Agency reports that the country is experiencing more frequent flooding, with approximately one in six properties in England at risk. Additionally, coastal erosion and landslides, exacerbated by extreme weather and rising sea levels, can cause significant loss of property value.

VALUE TO SUPPORT THE REQUESTED MORTGAGE AMOUNT

Subsidence and sinkholes, caused by the ground beneath a property collapsing or sinking, are also a concern. Climate change’s effect on weather patterns leading to wetter winters and drier summers, can destabilise the soil under homes and cause structural issues.

When applying for a mortgage, the lender typically arranges a property valuation to ensure the value supports the requested mortgage amount. However, many lenders also conduct additional checks to assess if the property is at risk due to climate change. These assessments could impact the lender’s decision to approve a loan for the property, independent of the property’s valuation.

POTENTIAL CLIMATE CHANGE RISKS TO THE PROPERTY

Consequently, securing a mortgage on a ‘high-risk’ property might be more challenging, especially if it’s uninsurable due to continual flooding or unstable land. Before applying for a mortgage, it’s crucial to consider potential climate change risks to the property.

If you suspect a risk, it might be beneficial to instruct a surveyor to conduct an in-depth survey rather than relying solely on the lender’s valuation. Also, remember that most lenders require you to maintain building insurance for the mortgage term. If they perceive the property to be at risk from climate change effects, they may ask you to confirm that you have suitable coverage.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.