Securing a Holiday Let Mortgage on a Listed Building

Securing a mortgage on a grade I, grade II* or grade II listed building can come with its challenges. Mortgage providers view listed properties as a bigger risk to lend to and so the application process can be difficult to navigate, with fewer lenders to choose from and tougher criteria to meet. Considering that getting even a regular residential mortgage on a listed building can pose challenges, it follows that getting a holiday let mortgage can be even more complex.

The good news is that most listed buildings are mortgageable. However, it’s important to understand that lenders don’t deem them to be ‘standard’ properties and as such, both the property itself and the buyer will be subject to close scrutiny. In this article, we will discuss how mortgages for listed buildings work; the difference between I and II grading and the lending criteria.

Why are listed properties risky for lenders?

Historic England describes listed properties as: “Nationally protected historic buildings and sites in England.” Therefore, by their very nature they pose a higher risk to lenders, for a number of reasons:

• Historic buildings aren’t necessarily of standard construction, in the same way that a modern building would be. Features could include timber framing or a thatched roof, for example, both of which are problematic for lenders. In the same way, plumbing and electrical systems could be dated and more susceptible to damage and malfunctioning.
• Old properties are more likely to have problems that have developed over a long period of time, such as damp in the walls or dry rot.
• There can be more general maintenance required with historic buildings, but there are also more rules in place which can prevent owners from making necessary changes, if they change the appearance of the building. For example, changing the bay windows or repainting the frontier of a listed townhouse requires the owner to get consent, which can deter them from acting.

For any of the above reasons, lenders will worry about a listed property’s potential for resale; if the owner defaults on their mortgage and the property gets repossessed, the lender wants reassurance that they’re left with an asset which they can sell. A property with drafty single glaze windows, damp issues or is prone to leaks therefore poses a problem.

In the same vein, lenders will need reassurance that buyers have good financial security. As mentioned, listed buildings generally require more upkeep than a standard property; the owner must have the money to cover general maintenance and/or refurbishment costs.

Grade I, Grade II* or Grade II listed

How mortgageable a listed property is will partly depend on whether it’s classed as grade I or grade II.

Grade I listed buildings

Grade I listed buildings are described by Historic Britain as of ‘exceptional interest’ and are much rarer. Examples include Buckingham Palace, Warwick Castle and the Royal Albert Hall. It is possible to get a holiday let mortgage on a grade I listed building, but it’s a far more complex process and likely to be with a bespoke lender.

Grade II* listed buildings

Grade II* is the next level and slightly more common but still categorised as ‘buildings of particular importance, of more than special interest’. These properties are considered more mortgageable than grade I but are also harder to navigate due to their importance!

Grade II listed buildings

Grade II listed buildings are described as of ‘special interest’ but are generally more ‘standard’ buildings and can often be used as a residential property. For example, a search on Historic England for grade II listed buildings in the Cotswolds generates 2,958 results which includes plenty of regular cottages and homes. Although a grade II listing can still require a more specialist mortgage, the process is therefore simpler.

Imagine an apartment in a grade II-listed regency townhouse that’s been fitted with a designer kitchen, modern bathroom, and is decorated to the highest standard. The apartment itself doesn’t pose any problems to the lender, but the building itself might; lenders will want a thorough survey carried out, to ensure that there aren’t underlying problems that have developed over the years. For this reason, getting a mortgage on the apartment could require the buyer to use a specialist lender

What are the common lending criteria for listed buildings?

Habitability

Holiday let lenders require that all properties, especially listed buildings, are safe, structurally in order, and suitable for holiday letting from day 1 (see our article on refurbishments). There will be an additional focus on age and any unique aspects of these listed properties to ensure they are also readily sellable in the future.

A detailed survey

Holiday let lenders will require their surveyors to conduct a detailed review of a listed building to spot any issues that might not be common with modern properties. Certain aspects of the building’s listed status, such as the requirement to use only lime mortar for certain repairs or modifications, need to be assessed and considered.

Potential defects

Listed buildings are old by their definition and old buildings can have certain risks which lenders will search for, such as:

• Structural problems due to age and the materials originally used in construction (think ‘wattle and daub’)
• Outdated electrical, drainage or plumbing systems that don’t meet modern standards and cannot be easily upgraded without disturbing the building’s historical integrity or needing special permissions
• Woodworm, dampness and rot, all of which are common in older buildings, especially in the roof timbers and other structural supports

Future resale risks

The surveyor’s report for a proposed holiday let listed building will specifically seek to assess not only the estimated current market value of the property, but also any preservation restrictions that might impact future sale.

Lenders are particularly cautious about financing listed buildings due to the additional complexities involved. They will consider the findings of the valuer’s report closely, weighing the property’s market value against potential costs and restrictions posed by its listed status. A detailed and favourable valuer’s report can greatly assist in securing a listed building mortgage.

To conclude

Obtaining a holiday let mortgage on a listed building requires thorough preparation and understanding of the challenges and risks involved, but with the right specialist holiday let mortgage broker to guide you, getting a secured loan on such types of building should not be a problem.

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