Applying for a mortgage while on maternity leave can feel daunting. Lenders scrutinise your income to assess affordability, so any deviation from standard employment (including maternity pay) can raise questions.
This article explores the topic in a Q&A format, addressing how lenders treat maternity leave and what documentation you’ll need to secure your mortgage.
Q1: Can I get a mortgage while on maternity leave?
In short — yes, you can. Most UK mortgage lenders will consider applicants on maternity leave, provided they can demonstrate a return-to-work plan and affordability based on their regular income. The key is to show that your long-term income supports the mortgage payments, even if your current income is temporarily reduced.
But every lender’s approach to calculating this is different. So, if you’ve spoken to your bank or existing lender and been told they can’t help, get in touch. It’s our job to delve through the market and find lenders whose criteria you do meet.
Q2: What income do lenders use when assessing my application?
Lenders usually base affordability on your return-to-work salary, not just your current maternity pay. You typically need to provide:
- A letter from your employer confirming:
- Your current maternity leave status
- Your expected return-to-work date
- Your contracted hours on return
- Your salary on return
- Recent payslips (from before maternity leave)
- A current payslip — unless you’re on extended leave and receiving no pay
Many lenders require your return to work to be within a set timeframe, typically three months. But not all do — competitive lenders may consider your full return-to-work income even if the return date is further away.
In such cases, most will want to see how you’ll cover any shortfall in the meantime if the mortgage starts before your return — typically using savings.
Q3: Will potential childcare costs affect how much I can borrow?
Yes, if you’re buying a residential property. For buy-to-let properties, usually not.
For residential loans, lenders will ask what childcare costs you expect upon returning to work. But affordability calculations are complex — someone with a high household income and no debts may find their maximum loans unaffected. On the other hand, those with significant commitments, lower income, or other children may see a drastic difference.
If you don’t expect to have childcare costs on return, that’s fine — as long as your explanation is realistic. Many families rely on relatives or alternate shifts to manage care, but if the lender doubts your reasoning, your application could be declined.
Buy-to-let affordability is assessed differently, with rental income taking priority. In that context, childcare costs have little or no effect on borrowing potential.
Q4: What if I don’t plan to return to work full-time?
If you’re returning part-time or not at all, lenders will assess your affordability based on your expected income — not your previous full-time salary. Be upfront about any changes.
Lenders may consider your partner’s income or accept other sources (e.g., benefits, rental income) to support the application.
On the plus side, returning part-time often reduces your childcare costs, which can help offset the lower income.
Q5: Will lenders consider statutory maternity pay (SMP)?
Some will, but it depends on the lender. SMP alone is rarely sufficient to support a mortgage on its own — but it can be included as part of total household income.
If your return to work is confirmed, SMP can still help with affordability in the short term, especially if paired with your partner’s income or savings.
Q6: Can I use Child Benefit or other family-related income?
Yes — some lenders include Child Benefit or Child Tax Credit in affordability calculations, but usually only if the child is under a certain age and payments are stable.
Universal Credit and similar benefits are treated more cautiously due to variability.
Q7: Does being on maternity leave affect my credit score?
No — maternity leave itself does not affect your credit score. However, reduced income might impact your ability to manage credit or bills, which can affect your profile. It’s important to stay on top of financial commitments during this time.
Q8: Will being pregnant or on maternity leave affect a joint application?
Only in terms of the maximum loan and the choice of lenders, as discussed above.
Your partner’s income will still be considered in full if it remains unaffected. If you’ve opted for shorter maternity leave and extended paternity leave for your partner, the assessment will be similar — lenders will still focus on return-to-work income, timing, and employer confirmation.
Q9: What if I’m self-employed and on maternity leave?
Since income assessments for self-employed applicants are usually based on tax returns up to 18 months old, it’s possible that your maternity leave won’t appear in your accounts.
That said, it’s crucial to be transparent. If your income has recently reduced due to taking time out, your broker needs to know so they can match you with lenders whose rules accommodate this.
If the income appears stable — and your break hasn’t significantly affected turnover — then lending outcomes may remain largely unaffected.
Be aware: lenders increasingly use credit reference data and open banking to cross-check income consistency, so honesty is critical.
Q10: What’s the best way to strengthen my application?
Simple: Work with a broker.
Despite what you may hear, getting a mortgage isn’t about “strengthening” your application — it’s about applying to the right lender.
Most lenders don’t make case-by-case decisions. They follow rigid lending criteria — you either fit their model or you don’t. That’s why matching your profile to the right lender matters far more than perfecting a “generic” application.
And this principle doesn’t just apply to maternity leave. It’s true for all scenarios — income type, property type, credit history, and more.
Final Thoughts
While maternity leave can complicate a mortgage application, it doesn’t have to be a barrier. Lenders ultimately care about long-term affordability, not just your income at the moment you apply.
With the right paperwork — and the right broker — you can secure a competitive mortgage and plan confidently for your family’s future.
Many self-employed applicants believe they’re at a disadvantage when it comes to securing a mortgage.
But the problem isn’t eligibility—it’s self-advising. The rules lenders apply to income calculations for the self-employed are often complex, technical, and vastly different from one another. What confuses many is not whether they can get a mortgage, but how their income will be assessed—and how that assessment can swing their borrowing potential by tens or even hundreds of thousands of pounds.
This post unpacks the different classifications of self-employment—sole traders, limited companies, partnerships, LLPs, and contractors—and examines how lenders treat each. Whether you’re new to self-employment or an experienced business owner, understanding this will give you clarity—and a significant advantage when applying.
When Are You Considered Self-Employed for a Mortgage?
You may think you’re employed, especially if you’re on payroll—but if you own 20% or more of the business you work for, many lenders will treat you as self-employed and virtually all will work this way if you exceed 24% ownership. That means you’ll need to provide different types of income evidence than a standard employee would.
Being “self-employed” in the eyes of a lender doesn’t just refer to being your own boss—it’s about ownership, control, and liability.
How Sole Traders Prove Income: SA302s, Accounts, and Lender Variations
What is a Sole Trader?
A sole trader is a self-employed individual who owns and operates their business as a private individual. There’s no legal distinction between personal and business assets. It’s the simplest business structure in the UK and often used by freelancers, tradespeople, and consultants.
How Lenders Assess Income
Lenders will nearly always ask for:
- SA302s (tax calculation summaries from HMRC)
- Tax Year Overviews (TYOs) confirming tax paid
They’ll typically use your taxable profit as the income figure. But this is where it gets nuanced:
- The number of required years trading will vary; giving differing lending amounts.
- Some lenders may allow adjustments for capital allowances (like investment in equipment) which reduce taxable profit but don’t are not ongoing expenses.
- A small number may instead use operating profit from formal accounts—but only when these are professionally prepared.
Limited Company Directors Mortgage Rules: Salary, Dividends, and Retained Profit
What is a Limited Company?
A limited company is a distinct legal entity from its owners (directors/shareholders). Profits belong to the company, not the individual, and are typically paid out as a mix of salary and dividends.
How Lenders Interpret Income
This is where things really fragment:
- Some lenders use salary + dividends reported on SA302s. But other will use the company accounts, offering two different year ends, and very different lending amounts.
- A few consider retained profits (undrawn earnings left in the company) using:
- Net profit before tax
- Or operating profit (with or without director’s remuneration)
Different documents often cover different time periods, so two lenders may assess two different years—leading to wildly different loan sizes.
And if your company has:
- Large retained profits
- Heavy capital allowances
- Temporary R&D losses
- Or rapid growth in recent trading
…then some specialist lenders may ignore these anomalies or allow income to be based on just one year’s strong performance.
In short: your income could be £30,000 or £130,000 depending on which lender is looking.
Directors Loan Account Income in a Mortgage Application
Some company directors will be drawing income from a “directors loan account”. Often this is a notional deductible for tax-purposes created when parts of a business are sold or transitioned from one type of ownership to another.
Whilst great for tax purposes; directors loan account income is relatively toxic from a mortgage point of view with most lenders refusing to consider it. However, some may and this will be an income type where it highly unlikely you will successfully self-advise on a mortgage.
LLPs and Partnerships: Mortgage Evidence Rules for Business Partners
What is a Partnership or LLP?
A Partnership shares ownership and liability between individuals. A Limited Liability Partnership (LLP) allows partners to limit personal liability, functioning somewhere between a general partnership and a limited company.
Lender Preferences
Many lenders will look at:
- Your share of taxable profit from SA302s
- Tax year overviews
- Sometimes, partnership accounts showing total firm performance
However in LLP’s:
- Some lenders require returns from all partners, which can be extremely prejudicial in firms like law practices with 100+ partners.
- A few lenders may exclude unusual deductions (e.g. one-off R&D costs) or base assessments solely on the applicant’s income share.
Once again, approaches vary significantly. Some focus strictly on the individual; others scrutinise the firm as a whole. So using a competent mortgage advisor will make the process far simpler.
How Many Years of Accounts Do You Need for a Self-Employed Mortgage?
- Most high-street lenders want two years of accounts or tax returns.
- Some prefer three years, especially if profits are volatile.
- A growing number of lenders—both high street and specialist—can work with just one year of trading, especially with strong performance and sector stability.
This is key for startups or professionals transitioning into new business models. The quality and consistency of the accounts often matters more than time alone.
Changing from Sole Trader to Ltd Company: Does It Affect Your Application?
Switching from one business type to another? Lenders may see this as a continuation or a new venture—and it’s not always clear-cut.
Common Examples:
- Sole trader incorporating into a limited company: Some lenders treat it as the same business. But if a new shareholder (like a spouse) is added for tax planning, others may deem it a new business entirely.
- Running both sole trader and limited company simultaneously: This is usually problematic as one side of the income is decreasing significantly (and therefore often disregarded) whilst the other increases (and therefore gets averaged down). Avoiding this arrangement is generally best for mortgage purposes.
- Changes in trading activity: If your business has entered new markets or taken on new partners, many lenders will reset the clock on required trading history.
Can Contractors or CIS Workers Be Treated as Employed by Lenders?
What Are CIS and Day-Rate Contractors?
- CIS (Construction Industry Scheme): Self-employed but paid with tax deducted at source.
- Day-rate contractors: Typically IT, engineering, or creative professionals with consistent contracts.
How Lenders Treat Them
Some lenders assess these individuals as employed, using:
- A calculation like day rate × 5 × 46 weeks
- No need for two or three years of accounts
This can be especially helpful for:
- People who’ve just gone self-employed
- Those transitioning from salaried employment in the same industry
- Applicants with day/weekly contracts at equivalent or higher income levels than before
But this is an area where many lenders will not treat you in this preferential way, and for those that do it is dependent on lots of other widely varying criteria like income level, contract duration, length of industry sector experience etc. Hence using a mortgage broker is a good idea to navigate this complexity.
Why Income Evidence Changes How Much You Can Borrow
Even among reputable high street lenders, loan sizes can vary significantly based on:
- Income calculation method (SA302s vs accounts)
- Treatment of capital allowances
- Consideration of retained profits or R&D losses
- Number of trading years accepted
It’s not uncommon for one lender to offer £120,000 while another offers £320,000 to the same applicant.
Why You Should Use a Mortgage Broker if You’re Self-Employed
If you’re self-employed—whether as a sole trader, LLP partner, contractor, or limited company director—your mortgage journey is entirely navigable, but not intuitive.
Getting it right means:
- Understanding how lenders interpret income
- Knowing which documents to present—and when
- Matching your business structure to the right lender criteria
But this is only one aspect of your application, and all the others are equally complex and varied. And that’s why an experienced mortgage adviser makes the difference. We help ensure you’re assessed accurately and fairly, maximising your borrowing potential with the minimum of stress.
When it comes to building your credit profile, the internet is awash with well-meaning advice. Credit reference agencies often promote a strategy of regular borrowing, spending on credit, and applying for new lines of credit to “build a score.” But for many aspiring homeowners—especially those early in their UK financial journey—this guidance can be more harmful than helpful, at least in the short term.
This article explores how credit scoring really works when it comes to mortgage applications, why “building credit” through borrowing may backfire, and why you may already be mortgage-eligible—even if you’ve never had a credit card.
The Credit Building Myth: Why More Isn’t Always Better
Credit reference agencies like Experian and Equifax frequently advocate a proactive approach to credit building: take out a credit card, use it regularly, repay in full, and consider increasing your credit limit over time. These actions, they argue, demonstrate responsible borrowing and improve your score.
But here’s the catch: these same activities often create red flags for mortgage lenders.
- Too many credit applications in a short space of time? That’s a hard search footprint spree—mortgage lenders might see you as financially desperate. It’s also a high-risk indicator for identity fraud.
- Multiple credit cards or high balances, even if managed well? That can raise concerns about your overall debt-to-income ratio and signal over-reliance on credit or a debt appetite that could become unhealthy.
- New lines of credit shortly before a mortgage application? Many lenders interpret this as financial instability.
So, while your numerical score might be inching upwards, your mortgage eligibility could be quietly sliding downwards.
What Lenders Actually Want to See
Contrary to popular belief, mortgage lenders don’t just look at your “credit score” as a magic number. They consider a broader financial portrait, including:
- UK address history (residency length and consistency)
- Presence on the electoral roll (if possible)
- Current credit commitments (and how stretched they make your finances)
- Bank account stability
- Affordability assessments based on income—not just credit
In fact, most applicants with just one or two UK current accounts, a mobile contract or a utility bill will pass credit scoring—even at high loan-to-value ratios—after just a year or two of UK residency.
This is especially true if they’ve kept their credit history clean (i.e., no missed payments, defaults, or excessive credit usage) and have consistent address history.
Other factors also affect things. Regularly moving home, borrowing high income multiples, or financial pressures like having dependents may also impact your score.
No Credit? No Problem—Sometimes
A common misconception is that “no credit history” equals “bad credit.” But this isn’t always the case.
There are plenty of borrowers who have:
- Never taken out a credit card
- Never had a loan
- Lived in shared accommodation since childhood (so no bills in their name)
- Just opened their first UK current account
And yet—they pass credit scoring for a mortgage.
How? Because lenders weigh up a combination of risk factors. For many mortgage providers—especially those operating in the high loan-to-value space or serving younger borrowers—the absence of credit data is not automatically a dealbreaker. It’s certainly better than a credit file littered with missed payments, payday loans, or an overabundance of credit utilisation.
To put this into context: we recently had an application approved by a high street lender, on top-tier rates, for a foreign national with only 18 months’ UK residency, a 15% deposit, and no credit data at all. She was also a fixed-term contractor.
On the flipside, we’ve seen applicants with very high incomes, good credit history, big deposits, and high scores declined for reasons such as over-utilisation of available credit or an excessive debt-to-income ratio.
What Does Harm Mortgage Eligibility?
Here’s where the contradiction becomes obvious. While general credit advice pushes borrowers toward more borrowing, the factors that can seriously harm your mortgage chances include:
- Multiple hard searches in the last 3–6 months
Lenders see this as high-risk behaviour. It suggests financial strain or desperation.
- Too many active credit lines
Even unused cards can cause concern because of potential borrowing power.
- High credit utilisation
Using more than 30% of your available credit—especially if near the limit—can make you seem financially stretched.
- High debt-to-income ratio
Even if all your payments are up to date, owing sums that account for a high proportion of annual income indicates a higher risk of default.
- Short UK residency
Newcomers are already subject to stricter scrutiny. Layering risky credit behaviour on top can lead to an outright decline.
Incorrect information is also a major factor in failed credit scoring for those with limited credit data.
Credit scoring is a risk assessment system. The less data held on an individual, the greater the importance of consistency. With the rise of online account management, it’s easy to forget to update your address on your mobile phone, PayPal account, or a dormant bank account.
But inconsistency heightens the perception of risk. So it’s vital for those with limited data to ensure their records are consistent, up to date, and accurate.
We even saw one applicant declined—despite a good income, clean credit, and a large deposit—simply because he had numerous accounts under his nickname “Brad” instead of his legal name “Bradley”. Issues like this can take months to fix, so address them as early as possible.
A Smarter Approach: Focus on Stability & Accuracy—Not Activity
If you’re planning to apply for a mortgage in the near future, the best credit advice is actually quite simple:
- Avoid new credit applications for at least 3 months before applying.
- Don’t take out credit unless absolutely necessary.
- Keep existing accounts open and in good standing—but use them sparingly.
- Register on the electoral roll at your current address if eligible.
- Maintain consistent UK address history.
- Get your statutory credit report for free from Experian, Equifax, and TransUnion.
- Ensure your information is accurate: use your full legal name, correct date of birth, and current address across all active accounts.
- Use a good mortgage advisor.
In short, less is often more. Yes, it’s in our interest to suggest using a broker—but it’s also in our interest to help you succeed. If you’re declined, we don’t get paid either. That’s why we work from a “first, do no harm” perspective—using credit checks sparingly and only with lenders aligned with your profile.
Final Thoughts: Rethink the “Credit Score Game”
The idea that you must be constantly borrowing to prove your creditworthiness is deeply flawed—especially in the mortgage world. For many borrowers, particularly young adults and new UK residents, overplaying the credit game can actively harm short-term eligibility.
Mortgage lenders want to see financial responsibility, not financial activity. That means stable accounts, low or no debt, and consistent behaviour—not a long list of hard credit checks or juggling multiple cards.
While using credit doesn’t inherently harm your score—and may help build it over time—it’s not a panacea for credit worthiness.
Before you take out that next credit-builder card or personal loan, ask yourself:
Is this helping me in the long term—or just ticking a box on a generic credit checklist?
In our Q&A, we address some of the frequent or unusual questions posed to mortgage brokers.
Does RSU income count as income towards a mortgage?
In short, yes! We can help you find lenders who can consider this income, though many will not.
There is, however, still a good range of suitable lenders for most applicants, with rates ranging upward from some of the most competitive in the market.
If your application has been declined, or if you have spoken to other advisors who said this income isn’t acceptable, call us.
It is a complex type of income, which many advice firms may be unfamiliar with. Many lenders will not accept it, so never take being refused by a few lenders as a definitive answer.
If another advisor says it’s unsuitable, other factors may be involved. So always take a second and third opinion.
Our RSU income mortgage advice service
The criteria determining overall eligibility and how much will contribute towards your maximum loan is complex and varied.
The good news is we can help you find and arrange suitable loans with lenders who accept this income stream and calculate correctly their appropriate maximum loans whilst also ensuring that you meet all the other criteria that might be applicable.
There’s a good chance (if you receive RSU income) that you may also have other challenging factors, like non-sterling income, dual-taxation arrangements or a fixed-term contract. If you are a foreign national on a visa, this is also one of our areas of expertise, so rest assured we can help.
Our typical advice fee is only payable after a fully approved application (there is no cost in getting recommendations). So, we don’t earn anything unless an application is successful.
Our typical fee is just £299. We earn a commission from the lender (but this is built into the product), so we don’t change the rate or applicable fees. We’re whole of the market and deal with most of the lenders in the UK. We don’t typically charge a fee on remortgages.
We do not, however, deal with customers residing outside the UK. If you live overseas, we cannot assist you. Other advisors may.
Maximum income multiple available with RSU income
This question, is raised frequently. But lenders don’t just use income multiples, so you shouldn’t focus on this aspect.
Whilst most lenders have a maximum multiple (which many never publish), they usually have a myriad of other calculations as well; based on net income, other credit commitments, financial dependents and stress testing based on notional interest rates (one reason why maximum loans have decreased significantly in the current high-interest rate environment).
So, the only way to get a firm sense of how much you can borrow with complex income streams is to speak to a competent broker such as ourselves; we can check all the suitable lenders’ affordability calculations.
When it comes to complex income streams, especially those that vary month-to-month, it’s necessary to see payslips over 3-12 months, P60s and get a full breakdown of all commitments to give an accurate estimate.
If you try to preempt this with income multiples, you might either massively over or underestimate realistic borrowing levels. There is no cost involved in having an outline discussion with us. So get in touch!
Factors affecting the lenders available for RSU income mortgages
With any income that fluctuates, lenders will often look for continuity. If a monthly bonus scheme has been received in only one of the last three months, fewer lenders will accept it.
Being a UK taxpayer and being paid in sterling is a requirement for many lenders accepting RSU income, but not all. If your income is in another currency or taxed overseas, we can still help.
The length of time working for your current employer will be pivotal in the number of lenders available. If you have worked for this organisation for less than a year, fewer lenders are available.
Some lenders will only consider this income once it vests. Hence, they may be looking at income received two or three years ago. In that case, you would need to have been employed with the current firm for a long period.
What is income paid as ‘restricted stock units’ otherwise known as RSU income?
This income is quite unusual for those employed outside the tech sector. The employer pays someone part of their salary or performance-related pay in the company’s shares instead of cash.
These shares are restricted, meaning they receive them several years after being awarded, typically with a requirement to remain at the business to receive those share units.
It’s a great way for the company to create further incentives for the employee to remain at the organisation, and work to the best of their ability.
The employee has a significant part of their income riding on both remaining at the business and its long-term performance.
Why do many lenders refuse to accept this income?
The logic can be quite varied and is typically quite flawed.
Lenders will often say it’s about the volatile nature of many of the shares involved; price fluctuations in shares like Alphabet (or Google), Apple, Amazon, Microsoft, Tesla, etc might be more transient than others, but they are still some of the most valuable entities on earth.
Some lenders complain that the income is deferred and not in someone’s pocket for several years.
That could be a concern for a new starter, but (for those who have been in the job for several years), they arguably provide a greater degree of certainty that the applicant’s income continues through recessions and downturns.
They might also choose to retain the stock as an investment, but anyone paid cash could also buy shares with their income; the lender still has the same exposure.
Really, underneath the answers given by the lenders is an underlying truth; lenders have to simplify their decision-making processes and regiment these in some way (to facilitate scaling their operation).
So, only the smaller building societies or boutique private banks tend to assess each application on a ‘case by case’ basis and typically charge a premium for that service.
Most lenders, therefore, create a very defined set of rules about what is allowed, and these rules often take a long time to reflect changes in the outside world.
RSU income will likely become increasingly accepted due to its growing prevalence and the fact that it arguably offers the lender more protection than other performance-related pay.
But today, if your lender refuses to consider this income, applying via a different lender will likely be the most effective use of time, and we can help to ensure that application goes to a lender who accepts this income.
In our Q&A, we answer some of the questions mortgage advisors answer regularly.
Question; I hear it is difficult to arrange a mortgage on a freehold flat; why is this, and is it possible to mortgage one?
In a freehold property, you are responsible for the maintenance and insurance of the building and own the land attached.
In the case of a typical house, this is a good thing. However, in the case of a flat, there may be no clear definition of who is responsible for various parts of the building.
Your ceiling may also be a neighbour’s floor, and your floor, another neighbour’s ceiling.
Imagine that your upstairs neighbour leaves his bath running and your roof collapses; whose responsibility is this now?
If your neighbour has no insurance, it could get pretty messy, and that is why it can be a no-go area for many mortgage lenders.
But, the question of mortgaging freehold flats can also turn into something reminiscent of a Monty Python sketch.
Where the plot thickens; is in what context may the property be considered a freehold flat?
Freehold flats in Scotland
If you are buying in Scotland, especially if you live in the rest of the UK, you may be unaware that there has never really been an equivalent to leasehold property in Scotland.
So a property listed as a freehold flat is not a big issue over the border.
Properties that own a share of the freehold
Properties that own a share of the underlying freehold are not themselves freehold.
The property will have a lease and may need to pay service charges and ground rent, just like any other leasehold property, although some have no regular charges payable.
When a lease requires an extension, it is still a costly process.
Their main advantage over a leasehold flat is that you have some say in managing the freehold with the other owners; you would hope this means that charges should be more fairly administered.
These properties are often sold and listed as freehold, with the blissful ignorance of the vendor, estate agent and even the lenders’ surveyors.
Who, for reasons unknown to science, are usually considered bastions of fact in complex legal matters; despite having no relevant qualifications in the field; instead of the lender checking the land registry.
What ensues is mortgage applications being rejected based on properties being freehold on the hearsay evidence of an estate agent.
If you have found yourself in this situation, we should be able to help. These properties are normally acceptable to many mainstream lenders.
Many still have complex rules about the share of the freehold and how it is owned and managed, so it is vital to select the right lender. But if you have found this problem, we should be able to help.
Properties with a long lease or lifetime lease
On occasion, a property with a long lease of 999 years, or thereabouts, will be described by a vendor as freehold, under the impression that it is ‘as good as freehold’.
Often, when there is no service charge, ground rent, or a ‘peppercorn ground rent’ of £1 per annum, sometimes a service charge or ground rent is payable, but the freeholder is absent.
If the freeholder is known and the vendor is just misrepresenting the property as freehold then the situation is readily fixed by asking the vendor and agent to tell it like it is.
An AWOL freeholder can present different problems beyond the scope of this post and is something to discuss with your conveyancer or solicitor, but aren’t the boon they may appear to be.
In most cases, we can help you arrange a loan on these properties; if the freeholder is absent, consider this problem before getting seriously involved in the purchase.
A freehold flat or maisonette where the remainder of the properties in the block are leasehold
A common area of confusion is a property that owns the freehold of a block, and the remaining properties within it are leaseholds.
These are not uncommon; often they are created when someone converts a house into flats and retains ownership of one of those properties. It is not possible to own a lease to a property when you also own the underlying freehold.
Legally speaking, we are repeatedly advised by conveyancers that such properties should be as good as any other leasehold flat from a mortgage perspective, but you will not find this in practice.
The vendor of such a property will usually make it very clear that it is freehold, as there is a public perception of this being preferable due to the often unfavourable costs of service charges, ground rent and for occasional lease extensions imposed by many freeholders.
Mortgage lenders usually make their staff very aware though, that they do not lend on what we might consider a truly freehold flat, where all the properties in the block have a freehold title.
That creates a situation where the lender immediately rejects any application and refuses to value the property, under the misapprehension that it is the more ominous type of freehold flat.
For this reason, you will find it very difficult to arrange a mortgage on such a property without a competent advisor.
Generally, a mortgage on these properties should be possible with mainstream high-street lenders, although many may still be unsuitable. Get in touch with us for help on these.
A freehold flat or maisonette where the remainder of the properties in the block are freehold
This is where things get more complex.
For these properties, complex rules are set out by lenders within their guidance notes to conveyancers on acceptable tenure in the Council of Mortgage Lenders Handbook.
Whilst enquiring directly to a lender will usually result in an endless slew of responses refusing to consider freehold flats, speak to any conveyancer, and you find that there are often acceptable legal instruments other than an actual lease over the property.
You should be led by your conveyancer on the properties suitability for a mortgage from the legal perspective; the property may still be unsound structurally or have other issues that make it complex to mortgage.
Such properties may often be marketed as cash purchase only or even sold at auction. In the case of a cash purchase, the agents may have agreed to sell the property this way based on other factors, such as property condition. Again, this may have caused a decision to sell at auction.
So do not treat an indication from a conveyancer that a property can be mortgaged as final, and you should be prepared to risk losing your deposit if you intend to purchase such a property at auction and require a mortgage.
If you are intrepid enough to try and mortgage such a property we can help, once a conveyancer has been through the legal side and confirmed that it is suitable.
But expect that such a purchase could take some time as it might have to be sanctioned by the lender’s internal legal team, which is a notoriously slow process that often takes several weeks.
