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Property: A guide to unusual mortgages

·5-min read
Unusual mortgages: A guide to the mortgages you’ve never heard of
Buying an unusual property can cause headaches if you want to go down the traditional mortgage route, so it’s worth talking to brokers about other options. Photo: Getty

You may be used to seeing rates for tracker, fixed and variable mortgages but it’s easy to forget that there are other options available to suit buyers and properties who don’t fit into the traditional mortgage mould.

"There are so many different types of income, property and employments… and guess what, there are also so many different types of mortgages," says Sarah Tucker, founder of The Mortgage Mum.

These atypical mortgages are often poorly marketed and the only way you’ll find out about them is through a mortgage broker.

"There are plenty of solutions that aren’t well publicised and that borrowers could potentially miss out on, so a great place to start is by speaking to a mortgage broker and simply telling them about your circumstances and what you would like to achieve," says Phil Leivesley, senior mortgage adviser at MB Associates.

There are many reasons to opt for one of these mortgages — borrowers may be employed or self-employed in a job that has abnormal circumstances; the property itself may be unusual such as a holiday let; or they may be buying under atypical conditions, perhaps with someone else.

Read more: Perks and pitfalls of buy-to-let investing

These mortgages can often come with higher fees and interest rates. "The reason for this is usually justified… if a lender is taking a greater level of risk to fit your situation that has to come at a cost," says Chris Blackwell, mortgage adviser at TED Mortgages.

There are hundreds of these mortgages available — here’s a guide to some of those that aren’t commonly known about.

Mortgages for atypical properties

Buying an unusual property can cause headaches if you want to go down the traditional mortgage route, so it’s worth talking to brokers about other options.

One of the most popular "uncommon" mortgages is a self-build mortgage. Often a deposit funds the buying of the original plot, but a mortgage is needed to actually build the property.

"Here funds are released in tranches, once set milestones are hit within the build, allowing the borrower to move onto the next stage," says Leivesley.

Read more: The pros and cons of building your own home

Another unusual mortgage is for buying holiday homes that you plan to rent out.

"The rise of holiday lets is a topic many cannot find information on," Sarah Tucker. "But we need to educate clients more on this topic, as more and more investors are looking to purchase holiday lets instead of buy to lets due to the predicted increase in profits."

Occupation-based mortgages

Some mortgages cater for the needs of certain professions that find it difficult to get a loan under normal circumstances, or offer them higher income multiples.

Blackwell highlighted Kensington Mortgages’ “Hero” range, aimed at key workers, such as teachers, NHS staff and police officers, and Platform’s Professional Mortgage range for newly qualified professional applicants, such as accountants and architects.

"Another could be CIS mortgages for those that work in the construction industry and are technically self-employed but can be treated almost as employed by some lenders due to how their pay is structured," he said.

Mortgages for unusual situations

Those keen to buy but who have unique circumstances may also benefit from one of these mortgages.

Adverse Credit Mortgages, for example, help people who are or have been in bad financial situations.

"There is a huge market in place for this already but lots of potential borrowers don’t realise how this can cater for them," says Blackwell.

Read more: How much can I borrow on a mortgage based on my salary?

"Many don’t even approach them thinking 'my credit will be too bad for them' or due to embarrassment, and this is mainly due to a lack of understanding around what previous 'bad credit' is acceptable and what isn’t. I see this regularly with us being able to help people who thought there was no chance."For those trying to get on the property ladder, there are some mortgages that are often overlooked.

"One potential option might be a joint borrower sole proprietor mortgage, where additional borrowers (typically close relatives) join the mortgage in a bid to boost the affordability of the main borrower(s). If the additional borrowers have a good income with minimal outgoings, then this can have a significant impact on the amount that can be borrowed,’ says Leivesley.

"The additional borrowers don’t take any ownership of the property and, as such, may have no tax implications."

First time buyers should also consider rent a room mortgages, says Blackwell, where the rent from a spare room is taken into account when looking at affordability, and buy For uni/student mortgages, a joint borrower sole proprietor mortgage where students can own their own home and rent out rooms to contribute towards their mortgage repayments.

Read more: Everything you need to know if you rent out an HMO

If you are considering a more unusual mortgage, it’s important you engage the services of a reputable mortgage broker, says Tucker.

"The market is too difficult to navigate alone, and you could be missing out on the perfect mortgage for you and your situation."

Watch: How does the 95% mortgage scheme work?