How to Get a Mortgage on an Ex-Council Property?

The UK housing market is diverse, and one category that often piques the interest of first-time buyers and investors alike is ex-council property. These homes, formerly owned by local councils and often sold to tenants through Right to Buy schemes, could be seen to offer a compelling opportunity to secure a more affordable home. But is it difficult to get a mortgage on an ex-council property?

In short, it can be, but with the right knowledge and preparation, you can navigate the process smoothly. Let’s explore the pros and cons of buying an ex-council home, the challenges of securing a mortgage, and some tips for making it work, including current issues surrounding cladding in the UK.

What Is an Ex-Council Property?

An ex-council property is a home that was once owned and managed by the local authority or council but has since been sold to private individuals. These properties are often found in housing estates and can include everything from flats to houses. They tend to be well-built and are typically more affordable than equivalent private properties, making them a popular choice for buyers on a budget.

The Challenges of Getting a Mortgage on an Ex-Council Property

Securing a mortgage on an ex-council property isn’t impossible, but it can present some unique challenges that buyers should be aware of:

1. Lender Restrictions: Some mortgage lenders can be cautious about offering loans on ex-council homes, especially if the property is a flat in a large high-rise block. These properties are sometimes seen as higher risk due to issues around maintenance, marketability, and potential future demand.
2. Construction Type: Many ex-council properties were built using non-standard construction methods, such as concrete panels or steel frames. Lenders tend to be wary of these types of homes due to concerns about their structural integrity, resale potential, and insurability.
3. Estate Location: The perception of certain council estates may also affect a lender’s willingness to provide a mortgage. If the estate has a poor reputation or is in a less desirable area, lenders may consider it less likely to hold its value, which can result in lower loan-to-value (LTV) ratios or even a refusal to lend. Lenders will also look at the proportion of properties in a block that are already in private ownership. A low percentage may mean a lender will not be willing to lend.
4. Cladding Issues: Since the Grenfell Tower fire in 2017, cladding on residential buildings has become a critical issue for both homeowners and mortgage lenders. Many ex-council flats in high-rise buildings have been found to have unsafe cladding, making them harder to insure or mortgage until remedial work is completed. Lenders are often hesitant to provide mortgages for properties with unresolved cladding issues, meaning you’ll need to check the building’s cladding status before making any decisions.

Cladding Issues and Mortgage Challenges

One of the most significant concerns affecting ex-council properties, especially flats in high-rise blocks, is the ongoing cladding crisis in the UK. Following the tragic Grenfell Tower fire, cladding and fire safety issues have been under intense scrutiny. Thousands of buildings across the country have been found to have unsafe cladding materials, creating a nationwide problem for property owners, particularly those in council or ex-council blocks.

Here are some key factors related to cladding and how they impact mortgages:

1. EWS1 Form: If you’re considering buying an ex-council flat in a block that’s over 18 metres (or about six storeys) high, it’s likely that the building will need an External Wall System 1 (EWS1) form. This form confirms that the building’s cladding has been inspected and meets fire safety standards. Without this certification, lenders may refuse to offer a mortgage. If the building does not have a completed EWS1 form, you’ll need to check with the management company or local council to find out when an inspection is planned.
2. Impact on Valuations: If cladding issues are unresolved, the property could be valued at zero by surveyors, meaning it is essentially unmortgageable until the problem is rectified. This puts potential buyers in a difficult position, as securing finance or even selling the property becomes almost impossible without a clear plan in place for remediation.
3. Responsibility for Remediation Costs: In some cases, property owners are facing large bills to pay for cladding replacement, although recent government initiatives have been introduced to cover these costs in some circumstances. As a buyer, you’ll need to be aware of whether remediation costs have been covered or if you could be liable for them after purchase.
4. Marketability: Even if you manage to secure a mortgage for a property with cladding issues, you may find it difficult to sell the property in the future if the issue isn’t resolved. This makes it crucial to fully understand the building’s fire safety status before committing to a purchase.

The Pros of Buying an Ex-Council Property

While getting a mortgage on an ex-council property may pose some challenges, there are significant advantages to these types of homes:

1. Affordability: One of the biggest draws of ex-council properties is their price. These homes are often cheaper than comparable privately-owned properties, making them an attractive option for first-time buyers or those looking for value.
2. Spacious Layouts: Ex-council homes, particularly those built in the mid-20th century, were designed with practicality in mind. They often feature more generous room sizes and storage space compared to newer builds, which can feel more cramped.
3. Solid Construction: Many ex-council properties were built with durability in mind, and while some construction methods may raise concerns with lenders, many homes, particularly brick-built houses, are known for their robust structure and longevity.
4. Established Communities: Council estates are often home to long-standing communities. For some buyers, the community feel, and local amenities are major benefits of purchasing in these areas.

The Cons of Buying an Ex-Council Property

Despite their advantages, ex-council properties come with a few potential drawbacks that buyers should be mindful of:

1. Perception and Resale Value: The stigma attached to ex-council properties can make them harder to sell in the future, especially if the area has not undergone regeneration. Buyers should consider long-term marketability and be prepared for slower capital appreciation compared to other property types.
2. Maintenance Issues: Depending on the local authority’s management, ex-council flats, in particular, can sometimes suffer from maintenance issues, especially in larger blocks. Poor maintenance can impact your living conditions and reduce the property’s value over time.
3. Non-Standard Construction: As mentioned earlier, non-standard construction types can be a stumbling block, not just for mortgages but also for future buyers. Always have a thorough survey done to assess the property’s condition and potential future costs.
4. Service Charges: For leasehold properties, particularly flats, service charges and ground rent payments can add significantly to the cost of owning the property. It’s essential to understand these charges and factor them into your budget before committing to the purchase.

Tips for Getting a Mortgage on an Ex-Council Property

While it may be trickier to get a mortgage for an ex-council property, there are ways to improve your chances of securing a deal:

1. Work with a Specialist Mortgage Broker: Some mortgage lenders are more experienced with ex-council properties, particularly brokers who have worked with these products before. A mortgage broker can help you identify lenders who are more likely to offer mortgages on ex-council homes, especially if they are of non-standard construction or located in a high-rise block.
2. Check the Property’s Cladding and Construction Type: Before applying for a mortgage, find out what type of cladding and construction the property uses. Some lenders may accept certain types of cladding and construction, while others won’t. Your mortgage broker can help clarify this, and a thorough survey will help assess any potential risks.
3. Consider a Larger Deposit: If lenders view the property as higher risk, they may require a larger deposit. Be prepared to offer a 20% or even 25% deposit to improve your chances of securing a mortgage.
4. Get a Detailed Survey: If the property is of non-standard construction or has cladding issues, a full structural survey is crucial. This will help you understand any potential issues and could be required by the lender before they approve the mortgage.
5. Research the Area: Lenders may be wary of properties in estates that have a negative reputation or are located in less desirable areas. Research the area’s long-term prospects, such as upcoming regeneration projects, which could help with both resale value and lending options.

Is an Ex-Council Property Right for You?

Ex-council properties can offer value for money, but they require careful consideration. For the right buyer, these homes provide an affordable route onto the property ladder, often in desirable areas with a strong sense of community. However, it’s essential to be realistic about the challenges, particularly when it comes to securing a mortgage, addressing cladding concerns, and considering future resale prospects.

If you’re considering an ex-council property, the best course of action is to seek advice from an experienced mortgage broker. At Coreco, we have extensive experience helping buyers secure mortgages for ex-council homes, and we can guide you through the process to find the best deal for your circumstances.

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.