The good news is that you can get a mortgage for ex-council flats.
These properties can be good value, with more generous room sizes than other homes in a similar price bracket.
However, getting a mortgage on an ex-local authority property can come with some difficulties.
This article provides information and guidance on purchasing an ex-council flat, including an explanation of the process, the advantages and disadvantages, and how to get a mortgage.
Can you get a mortgage on an ex-council flat?
Mortgages are available, but lenders are often more cautious with ex-council properties.
The lender will be looking at:
- The construction methods
- The number of council-owned properties in the area
- If the property is in a high-rise, it is often considered a higher lending risk
- The length of the leasehold on the flat affects the risk to the lender
- If access is via an external walkway
The flat will need to be visited by a valuer. If the valuers report raises any concerns then the lender may impose additional conditions or ask for a higher deposit.
Specific types of concrete construction, or high rise flats, may simply be declined.
Lender considerations
THE PROPERTY
Type of construction
For many years, lenders have been reluctant to approve mortgages for concrete properties, and this would have included certain blocks of flats.
This was due to issues with specific types of prefabricated concrete used in the 60’s and 70’s. Any remaining concrete blocks will have undergone repairs and are now generally considered safe to lend on.
Height of the block
Lenders are worried about the future re-sale value of high-rise council flats, which often come with high maintenance costs. These costs can include window replacement and roof repairs.
In general, lenders are happier with blocks of flats that have less than six stories. Getting a mortgage in a 20 storey block will be difficult.
Size of the flat
Most lenders require the flat to be a minimum of 30 square metres. Fortunately, most ex-local authority flats are bigger than this.
Number of privately owned properties
Lenders will want to know how many flats in a block are privately owned, and they view buildings with mostly council tenants as less desirable. Ideally 50% or more of the flats should be owned.
Previous sales
Lenders will take into account the number of flats recently sold in the building as part of their assessment. A high number of transactions in the last few years will give them confidence to lend.
THE BORROWER
Age
They will look at the age you will be when your mortgage is due to finish. The maximum lending age ranges from 75 to 85. Where this goes beyond age 65, the lender will be looking for proof that you can afford the repayments during your retirement years.
Income
Your income needs to be high enough to qualify for the mortgage you need. But you also need to be able to prove it. This is not normally an issue for those on PAYE, but self-employed and company directors will need to submit accounts, SA302 and bank statements.
Affordability
Lenders primarily focus on assessing your ability to meet the monthly repayments, this is mortgage affordability. They will take into consideration potential interest rate increases and look at how you spend your money each month. And yes they will be looking at your bank statements.
Deposit
All lenders are happier with larger deposits as it reduces their risk. The absolute minimum is 5% of the purchase price. Having a deposit of 10% will give you access to more lenders and better deals.
Credit History
Having a poor credit history isn’t always a deal breaker, but it does seriously reduce your options. The type of mortgage you could get will depend on what the credit issue was and how long ago it occurred. If you think you might have some credit issues, start by getting a copy of your credit report (for all borrowers) and then start getting ‘mortgage ready’.
What are the advantages and disadvantages of purchasing a former council flat?
There are several benefits to purchasing an ex-local authority property.
- Affordability: Former council flats are often more affordable compared to other properties in the same area. This can be an attractive option for first-time buyers or those with a limited budget.
- Location: Many council flats are located in well-established communities with good access to local amenities and public transport.
- Solid Construction: These flats are known for their solid construction, offering robust living spaces.
- Spaciousness: Compared to many modern apartments, former council flats often have more generous room sizes and space.
But there are also some disadvantages.
- Service Charges and Maintenance Costs: Depending on the block, service charges can be high, and maintenance costs can be unpredictable, especially in older buildings.
- Stigma: There can be a stigma attached to living in a former council property, which might affect perceptions and potentially the resale value.
- Resale Issues: Selling a former council flat can sometimes be more challenging, particularly if it’s located in a less desirable area or in a high-rise block.
- Restrictions on Letting: There may be restrictions on letting out the property, which can be a disadvantage for investors.
- Building Insurance and Repair Costs: In some cases, building insurance can be more expensive, and you may be liable for a share of any major repair costs.
What types of mortgage are available?
Repayment method: Full repayment or interest only are normally available from most lenders. However, as the majority of new mortgages are set up as repayment, you will need to explain why you would need interest-only instead.
Mortgage term: Lots of mortgages are taken out for 25 years, this has been the default option for decades. The longest mortgage term you can get in the UK is 40 years. The length of term you will be granted will depend on your age now.
Interest rates: Overall, there will be deals that offer fixed rates, variable rates, tracker and offset. As each borrower has different needs, there’s no right or wrong option.
Occupation: Certain occupations or professions can make it harder to get approval for a mortgage. The self-employed will need to show that they have good average earnings over the last two years, while company directors will need their company accounts, in addition to bank statements.
You will find more useful information in our article: “Practical Guide: Mortgage Types“
How much can you borrow?
The amount of mortgage you can borrow will depend on your earnings and affordability.
While lenders can offer 4 or 4.5 times your annual income, they also need to see how you spend your money, and what proportion of your income is used to service debt (your debt to income ratio).
Loan to value percentage
Banks and building societies use the mortgage loan to value as a way of controlling their risk
The loan to value (LTV) is the maximum percentage of a property value that the lender will go up to (depending on your income).
In relation to ex-council flats, this could mean that the maximum LTV is 75%, rather than 80% for other flats. The mortgage you will be offered is slightly less, so you will need a higher deposit to compensate.
Is buying an ex-council flat a good idea?
Acquiring a property that was once under local authority ownership can be an excellent strategy for entering the housing market, especially if you’re eyeing central locations that are typically beyond your budget.
Ex-council houses and flats often come with a more attractive price tag compared to similar-sized properties in the same area. Additionally, they are frequently designed with ample space to accommodate families, and their construction is generally robust and long-lasting.
However, there are several factors you’ll need to weigh, such as the condition of the property, the quality of the neighbourhood, and the available financing options for your purchase.
Can you get a mortgage for a council flat as a first-time buyer?
Absolutely, obtaining a mortgage as a first-time buyer for a property that was once owned by the local authority is not only possible but can also be a financially savvy move. These types of homes often present a more budget-friendly entry point into the housing market, making them an attractive option for those looking to make their first purchase.
For first-time buyers, the affordability of ex-council homes can be a significant advantage, especially when compared to other properties in sought-after or central locations. The lower price point often means that the deposit required may be more manageable, which can be a relief for those who are accumulating savings.
Ready to explore your options?
If you’re just about to start a new mortgage journey and could use the guiding hand of a professional, don’t hesitate to reach out to a reputable mortgage broker.
An independent mortgage broker can access over 100 lenders on your behalf. They will make the process smoother and more profitable than going it alone.
Keep reading, keep asking questions. The more you know, the better decisions you can make.
