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Property investors often assume that securing finance for a property is straightforward. However, lenders will not provide funding for properties without proper planning consent, building regulations, or legal documentation. If a property is missing the necessary approvals, it can derail your mortgage application, increase risk, and reduce the property's marketability.
In this guide, we’ll explore:
Planning permission is essential for certain types of developments, extensions, and property use changes. If a property has undergone unauthorised alterations, lenders will not provide a mortgage or bridging loan because:
Common Planning Issues That Block Finance:
Conversions without consent (e.g., single dwellings turned into HMOs).
Extensions or loft conversions without planning approval.
Change of Use applications not submitted for commercial-to-residential projects.
Case Study: Rejected HMO Mortgage Due to Missing Planning Consent
Investor Profile: Sarah purchased a property in an Article 4 area and converted it into a 6-bed HMO without checking planning requirements. When she applied for a mortgage, the lender refused due to no formal planning approval.
Issue: The lender deemed the property unmortgageable.
Even if planning permission isn't required, all property modifications must comply with building regulations. These ensure structural safety, energy efficiency, and accessibility. If building regulations are missing, lenders may refuse to finance the property.
Investor Profile: Tom bought a house that had a loft conversion. The seller claimed it was fully compliant, but during Tom’s mortgage valuation, the surveyor flagged no Building Control sign-off.
Issue: The lender rejected the mortgage due to missing compliance documents.
Solution: Tom had to obtain an indemnity insurance policy, increasing his costs
Missing legal documents can kill a deal instantly. Without the correct paperwork, lenders see the property as high risk and will refuse finance.
If a property has missing planning consent or non-compliant building works, there are solutions to secure finance:
Use bridging finance to purchase properties requiring retrospective planning approval or remedial work. Once compliant, refinance onto a mortgage.
If building regulations are missing but the work was completed over 12 months ago, lenders may accept indemnity insurance to protect against enforcement action.
Apply for retrospective planning approval to correct unauthorised developments. This can take weeks or months, so plan ahead if refinancing.
Some specialist lenders provide finance for properties with planning complications, usually at higher interest rates.
Need a mortgage on a tricky property? See our Bridging Loan Options
Ans: No. Lenders require planning approval for significant changes. If permission is missing, you may need a bridging loan or retrospective approval.
Ans: It depends. Major works (e.g., extensions, electrical rewiring, loft conversions) require certification. Minor works (e.g., painting, flooring) do not.
Ans: No. Lenders won’t approve mortgages for properties deemed uninhabitable. You may need a refurbishment bridging loan before refinancing.
Ans: Standard insurers may refuse cover. Indemnity insurance can sometimes be obtained if the works were completed over 12 months ago.
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