Some quick adviceSome mortgage lenders don’t approve mortgages for properties made with a steel frame.
Frustrating as it may be, when you’re searching for a mortgage, it’s always best to check the eligibility criteria set out by the lender. Doing this helps you avoid accidentally applying to irrelevant lenders that aren’t worth your time as well as those that could be more likely to decline you.
What is a steel frame property?The definition varies between lenders but usually, a steel frame property is one that has a skeleton-like frame, constructed in such a way to support the floors, roof and walls of a building which are all attached to that frame. It’s not a traditional construction method and therefore, many lenders in the UK classify buildings of this kind as ‘non standard construction'.
A steel frame isn’t immediately obvious and lots of potential buyers are only made aware of the construction materials after a RICs survey has been completed
That can result in fewer lenders being available for you to apply with because their criteria for mortgage agreements might exclude this type of construction method.
It’s not just your choice of mortgage lender that’s limited with steel frame properties - home insurance providers are also known to have eligibility criteria that prevents them from providing cover for buildings made from non-standard construction materials.
Steel frame house mortgage adviceGood advice and the benefit of working with a broker can help mitigate against wasting time with mortgage lenders and insurance providers that can’t be of service to you.
Good brokers have access to a network of lenders, as well as long-standing relationships with banks and mortgagees throughout the UK. A bigger pool of options provides choice but it’s their knowledge of what constitutes as a good deal and who’s more likely to approve, that can be most useful to the people they help
Are there lenders that will offer a mortgage for a house with a steel frame?Yes and you can find out how many you’re eligible to apply with, under what conditions, without affecting your credit score.
Never apply for a mortgage or form of credit without checking beforehand if you’re the right candidate for that offer.
Getting rejected for credit i.e. a car finance deal or a mortgage, can impact your ability to get approved later down the line with another lender because whenever you apply, get accepted or rejected, a record of it will be visible for future lenders to view. Financial data like this is what lenders use to make a decision on whether you’re a good applicant for their product i.e. a mortgage
Other factors like your age, stability of income, the amount of gross income you receive and the type of property you want to mortgage, can all affect the decision too.
Why does the construction of a property affect a mortgage?Part of weighing up the risks of lending to someone buying a steel frame house involves thinking about how likely it is that the property could be resold in the future.
Banks and lenders have the right to repossess the property if you don’t repay your mortgage but a property made from a non-standard building material like steel or concrete might not sell as quickly or for as much as one made from traditional brick.
The maintenance of such buildings can be expensive, for example, steel components can deteriorate severely under the right conditions, particularly at the bases of the wall stanchions. That can raise issues with insurers and without buildings insurance and the financial protection it grants, you won’t be able to get a mortgage
What are the risks associated with buying a steel frame home?Whether you’re buying a home or a commercial property with a steel frame, you’re likely to come up against a plethora of lenders who won’t consider this type of build because of the risks associated with maintaining the steel to avoid corrosion.
In order to treat the steel components of the property overtime, you’ll need special equipment and possibly rust resistant treatments like hot zinc coating.
While steel is considered strong and durable, lenders will often require potential borrowers to prove they have the financial means and an ‘approved scheme of repair' before approving Furthermore, steel frame constructions aren’t necessarily the most energy efficient buildings and this can cause issues if you’re applying for a buy-to-let mortgage, which might have eligibility criteria that requires a minimum energy efficiency rating.
How can I buy one?
Find out how much you can borrowDifferent lenders calculate the maximum amount you can borrow based on their own criteria but, most will refer to your:
- Credit history
- Level of debt
- Deposit size
- And the type of property you’re buying
Your income usually weighs heavily on the ultimate decision and many UK lenders multiply your annual gross income between 4.5 and 6. So, if your yearly income is £30,000 and the lender agreed to provide a mortgage for 5 x that amount, you could borrow £150,000
If you have impeccable affordability and a low level of debt compared with your income, you might qualify for mortgages on the higher end of the scale but every case is unique.
Professionals like doctors, solicitors, pilots and teachers may be eligible to apply with lenders offer loans of up to 7 x an annual income, though with so many factors that can affect how much you can borrow, it can be useful to ask a mortgage broker to look at your circumstances as a whole and then tell you how much you could borrow with each lender that’s available to you.
That way, you avoid comparing lenders with criteria you don’t qualify for or to lenders that can’t offer you the mortgage size you require.
Find out if you’re eligibleDon’t apply for a mortgage without checking if you’re eligible for that specific deal. A broker with access to a wide range of lenders can help here, just remember to check reviews.
if you get rejected for a mortgage, either because of a mistake, a change in circumstances or because the lender won’t approve a mortgage on a house with a steel frame, it can appear on your credit history for other lenders to see.
You might meet one lender’s criteria but that doesn’t mean you’ll get approved or that other lenders will have similar criteria. Every agreement is different and factors like the length of the contract, whether the interest rate you’re charged is fixed or variable and how much the mortgage amount is, can all affect whether you’re the right fit and are therefore likely to get accepted as a borrower
Apply for a mortgage in principleThis isn’t a mortgage application but an agreement between you and a lender that IF you pass their final checks and IF the other conditions of the agreement can be met following a building survey and valuation, they’ll provide a mortgage.
Find the propertyOnce you’ve got your mortgage in principle, you’ll know your budget and can start making plans.
Having a mortgage in principle (MIP) or decision in principle (DIP), can give you an edge against other buyers. Knowing that a lender has pre-qualified you, can be enough to persuade a seller to accept your offer, especially if they’re in a rush to complete the transaction.
Apply with confidenceIf your offer is accepted, you’ll need to change that pre-approval into a mortgage offer. If you’re working with a mortgage broker and you have the benefit of having a mortgage in principle, you should be in a great position to proceed
For this part of the process, you’ll need to provide evidence of things like your source of income including any benefits or pensions, your identity and current address but again, if you’re working with a broker, you would have already checked your eligibility before hand, so they won’t bother you by asking for this information again.
Proceed to the underwriting stageErrors cost time and money and the mortgage underwriter that checks your mortgage application will scrutinise any discrepancies or mistakes in order to detect fraudulent activity or information that suggests that you can’t afford the mortgage.
This is where your broker can help again. It’s their job to make sure that all of the necessary documents concerning your loan application are perfect, before an underwriter sees them.
Get a building surveyIn order to inspect the quality and condition of the steel within the property and to assess any potential future issues with corrosion, you’ll need a building survey carried out by a RICS surveyor.
Depending on where you live, the property’s market value and the demand in the area, this might cost anywhere between £750 and £2,000 They’ll have to carry out an intrusive inspection (i.e. not a standard RICS home buyers survey) so the seller will need to agree to this. That can cause delays and negotiations so you might want to ask a mortgage broker to manage this if you’re
- Not jumping for joy at the prospect of toing and froing back and forth with estate agents, the seller and the surveyor.
What are the different steel frame construction types?There are different types of steel frame constructions and a RICS home buyers survey might reveal which type of construction the property you want to buy is. The seller may advise you beforehand so a good tip is to ask about the materials used in the build of a property ahead of making an offer
Typical steel frames available to UK developers and self-builders include:
- Birmingham Corporation
- BISF (British Iron and Steel Federation
- British HousingTrusteel MkII
- Keyhouses Unibuilt
- Trusteel 3M
Receive a final valuationThis confirms that the steel frame property you’re buying has a market value that is equivalent to the price you’re paying for it. Your lender might decide to use their own surveyor in order to assess whether the property is mortgageable under their lending criteria. If it is, you’ll receive a formal mortgage offer.
How much deposit will I need?Most lenders require a minimum of 10% of the properties’ market value as a deposit, but expect to pay more if you have affordability issues that raise the level of risk you pose to a lender. Usually, though not always, the higher the risk of you defaulting (not repaying your mortgage), the higher the deposit.
5% deposits may be available with a selection of lenders although the amount of lenders you’ll have to choose from might be considerably lower if you’re looking for one that’ll approve a steel frame house purchase.
Can I get a mortgage on a steel frame property if I have bad credit?Yes but as mentioned above, the group of lenders you’ll have to choose from will already be reduced because of the ‘non-standard construction’ status that a property with a steel frame can have. So, you’ll also have to whittle down the list to find those that accept steel framed properties and applicants with credit issues
The severity of the bad credit and the date it occurred, can have an affect on whether you’ll qualify with some lenders. Recent, unpaid CCJs can be a no-no for some, while for others it might not be deemed as an issue worthy of excluding you from their deal.
Check your eligibility, know your options and then make an informed decision