Mortgage without building warranty: How to get a mortgage without a structural warranty

Obtaining a mortgage for residential properties is already a complex process, involving a long list of requirements set forth by the mortgage lender. But what happens when you throw in the lack of a building warranty into the mix? It’s a question that both financial lenders and prospective homeowners must grapple with. This article will delve into what a building warranty typically covers, why they are important, and what alternatives are available if you’re considering a house purchase without one.

The Importance of Building Warranties

Typically, a 10-year structural warranty is provided by warranty providers to protect against structural defects in the building construction. Granite Building Warranties and other warranty products offer security against structural issues that could compromise the financial stability of your investment. The warranty documentation usually includes coverage for load-bearing parts of the building, weather damage, and even accidental damage in some instances.

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Mortgage Types and Providers

Whether you’re exploring First-time buyer mortgages or Buy-to-Let mortgage options, mortgage companies assess the risk associated with the mortgage loan. The type of mortgage—be it a capped, collar, or combined mortgage—will affect the terms and conditions attached to it. Each mortgage provider might have their criteria for what forms of warranty they require or accept.

Dangers of No Warranty

Opting for a mortgage without a building warranty adds an additional risk. While a structural survey might indicate no immediate concerns, latent structural issues may surface later on. Without a warranty, the responsibility of addressing these issues falls on the homeowner, leading to additional costs like construction costs, legal costs, and damage to fixtures.

Water damage, for instance, is a common problem that develops over time, and without comprehensive cover, the cost of repairs can be astronomical. Housing schemes that include warranty cover generally have a period for action and a defects insurance period, offering a safety net for homeowners. This isn’t the case with a house lacking a warranty.

Alternatives and Solutions

Retrospective Warranty

If the building is relatively new but does not come with a warranty, some companies offer a retrospective warranty. CRL Structural Defect Insurance is one such option. However, be prepared for additional paperwork and possibly higher premiums.

Professional Indemnity Insurance

Some mortgage companies may accept a professional indemnity insurance policy from the builder as a form of assurance against structural defects. However, this comes with its risks. Builder liability may not cover all potential issues, and there might be a limited developer liability period.

Indemnity Schemes

Building standards indemnity schemes can sometimes act as an alternative to a structural warranty. This can be an option if you’ve received building regulation consent but not a full building regs certificate.

The Mortgage Application Process Without a Warranty

Applying for a mortgage without a warranty will involve a bit of paperwork and might require the intervention of a mortgage broker skilled in such niche transactions. Mortgage products that accommodate for the lack of warranty often come with higher interest rates to compensate for the extra risk. Rates may vary, so it’s essential to compare current rates and perhaps consider mortgage transfers if your current mortgage lender doesn’t offer favourable terms.

Conclusion

Opting for a mortgage without a building warranty is undoubtedly a path less travelled, filled with extra costs and risks. While it may be suitable for cash buyers or those willing to take on the additional risk, it’s not for the faint-hearted.

The lack of a warranty adds a layer of complexity to the mortgage process, but with due diligence and perhaps a little help from mortgage professionals, it’s not impossible. When the standard route is unavailable, knowing your options can offer some measure of security in an inherently risky venture.

By keeping abreast of building regs, consulting with Building Surveyors, and possibly investing in indemnity insurance, you can navigate the intricacies of acquiring a mortgage without the traditional safety nets in place. Whether you’re eyeing a brand-new property or a current house, make sure you understand the bits of house that could potentially become problematic down the line. Be prepared, be cautious, and most importantly, be well informed.