It’s a problem that can cause significant stress and uncertainty for homeowners and buyers alike.
Subsidence occurs when the ground beneath a property shifts and sinks, leading to cracks, structural instability, and a potential decrease in value.
If you’re facing this issue, securing a mortgage might seem difficult.
However, obtaining a mortgage on a property with subsidence is not impossible.
The type of subsidence, whether it’s historic or ongoing, the nature of any repairs, and the specific criteria of lenders all play a significant role in your mortgage application journey.
In this guide, we’ll explain what subsidence is, its impact on mortgages, and the steps you can take to secure a home loan for a property affected by this issue.
Understanding Subsidence
Subsidence is the downward movement of the ground beneath a property.
This movement can cause the foundation to sink, leading to structural damage such as cracks in walls, sloping floors, and jamming doors or windows.
It’s important to distinguish subsidence from similar ground movements:
Settlement
This is the natural compression of the ground beneath a new building due to its weight.
Settlement typically occurs within the first few years after construction and usually stabilises over time. It’s generally not a major concern unless it’s excessive or uneven.
Heave
This is the upward movement of the ground, often caused by the expansion of clay soils during wet periods.
As clay absorbs water, it increases in volume, putting pressure on foundations and causing them to lift. Heave can be as damaging as subsidence, leading to similar structural problems.
Common Causes of Subsidence
The UK’s geology and climate make certain properties more prone to subsidence:
- Clay Soil: Clay soils shrink in dry weather and expand when wet, causing movement that can affect foundations.
- Tree Roots: Trees, especially large ones with extensive root systems like oak, willow, and poplar, can draw moisture from the soil and cause it to shrink. Their roots can also put pressure on foundations.
- Leaking Drains: Leaking water from damaged drains or pipes can wash away or soften soil particles, leading to voids that the ground above can collapse into.
- Mining Activity: In areas with a history of mining, old tunnels and shafts can collapse, causing the ground above to subside.
Types of Subsidence
Historic Subsidence
This refers to past subsidence that has been repaired and is no longer active.
While it might not pose an immediate risk, it can still affect your ability to get a mortgage and the property’s value. It’s important to have documentation of the repairs and ensure the issue has been fully resolved.
Lenders may require additional information and surveys to assess the risk, and buildings insurance premiums may be higher.
Active/Ongoing Subsidence
This indicates that the ground is still moving, which is a major concern for lenders and potential buyers.
Active subsidence often requires extensive investigation to determine the cause and appropriate repairs before a mortgage can be approved. It can also significantly impact the property’s value and insurability.
In nearly all cases, lenders will not approve a mortgage on a property with active subsidence until the issue is resolved.
Signs of Subsidence
Early detection of subsidence is needed to prevent further damage and costly repairs.
Here are some tell-tale signs that your property might be experiencing subsidence:
Cracks in Walls
New or expanding cracks, especially diagonal ones wider at the top than the bottom, are a common sign. These cracks often appear around doors, windows, and corners of the building.
Sticking Doors and Windows
If your doors and windows suddenly become difficult to open or close, or if they start to stick, it could be due to the building shifting as a result of subsidence.
Sloping Floors
Subsidence can cause floors to become uneven or slanted. You might notice that objects roll on their own or that furniture seems to tilt.
Gaps
As the building moves, gaps can appear where walls meet ceilings or floors. These gaps might be more noticeable in older properties.
Rippling Wallpaper
Wallpaper that starts to ripple or tear, especially near cracks, can be another indicator of subsidence.
Leaning Chimney
If your chimney starts to lean or separate from the house, it could be a sign of significant subsidence.
How Subsidence Affects Mortgages
Subsidence can compromise the integrity of a property’s foundation, leading to expensive repairs that lenders want to avoid.
Subsidence isn’t just a structural concern; it significantly impacts your ability to secure a mortgage.
Lenders view properties with subsidence as higher risk due to the potential for costly repairs, decreased property value, and challenges in obtaining suitable buildings insurance.
It can also mean that they are much more difficult to sell, and no lender wants that.
Fixing subsidence
You won’t be able to get a long-term mortgage on a property with ongoing ‘active’ subsidence but many can be repaired using a method called ‘underpinning’.
Underpinning strengthens, or reinforces, a building’s foundations, making it more secure.
It requires specialist equipment and engineers, who will decide on the best way of supporting the house.
One traditional method involves excavating sections and then filling the void with concrete.
Mortgage Options
Despite the difficulties, securing a mortgage on a property that has suffered with subsidence is possible.
It’s worth noting that properties with subsidence history may present an opportunity to negotiate a lower purchase price, which can be a significant advantage for buyers.
Some mainstream lenders might consider applications for properties with historic subsidence that have been fully repaired, but they typically have stricter requirements.
These include proof of repairs with detailed documentation from a qualified structural engineer, an up-to-date structural survey assessing the property’s current condition, and evidence of appropriate buildings insurance that covers subsidence.
Examples of such lenders include Nationwide and Barclays, but their criteria can vary.
Specialist lenders focus on non-standard cases, including properties with subsidence.
They often have more flexible criteria but charge higher interest rates and may require larger deposits. Examples include Saffron Building Society and Kensington Mortgages.
If the property has active subsidence, you’re unlikely to obtain a long-term mortgage.
In these cases, a bridging loan can provide short-term finance to purchase the property and carry out repairs.
Once the subsidence is rectified, you can then apply for a traditional mortgage.
However, bridging loans come with higher interest rates and fees and you will need to find a substantial deposit.
Factors Affecting Mortgage Approval
Several factors influence whether your mortgage application will be successful:
Severity of Subsidence: Minor cracks might be less concerning than major structural damage. The extent of the damage will impact the lender’s risk assessment.
Time Since Repairs: Lenders prefer properties where repairs were completed several years ago, demonstrating stability. More recent repairs might require additional scrutiny.
Type of Repair: The method used to rectify subsidence matters. Some lenders favour underpinning, while others might accept less intrusive methods.
Insurance: Having comprehensive buildings insurance that covers subsidence is essential for mortgage approval. Specialist insurers can provide tailored policies for these situations.
Property Value and Subsidence
Subsidence will impact a property’s value, both immediately and over the long term.
The extent of the impact depends on the severity of the subsidence and the effectiveness of any repairs. In the short term, a property with unresolved subsidence could see a decrease in value of 15% to 25%, or even more in severe cases.
However, successful repairs can often restore a significant portion of the lost value. For example, a property that has undergone underpinning and has a certificate of structural adequacy may regain much of its pre-subsidence value.
In most cases, a property that has suffered subsidence will be worth less than one that hasn’t.
The Mortgage Process
If you are convinced that a property with a history of subsidence is worth it, you would be wise to talk with a mortgage broker about which lenders will be interested.
Do this as early on in the process as you can.
Buying a house that has been underpinned will present some obstacles when you’re applying for a mortgage.
It might put some lenders off, but if the issue has been fully resolved, you should be able to get a competitive mortgage deal.
Not all lenders will be available to you, and your broker needs to find one that accepts both the property and you.
They’ll have the inside track on which lenders are more open to considering applications for underpinned properties.
Some lenders even specialise in non-standard or high-risk properties, and your broker will know exactly who to approach on your behalf.
Decision in Principle
A Decision in Principle, or DIP, can be organised by your broker.
It is a statement from a lender indicating that they may be willing to lend you a certain amount towards buying a property.
Their decision is based on your income, regular outgoings, and credit history.
The amount shown on the DIP is not guaranteed, but it gives you a good heads up of what mortgage you can qualify for.
You will find more useful information in our article: What is a mortgage Decision in Principle?
Property Survey
One important step is to commission a thorough structural survey from a qualified chartered surveyor with expertise in subsidence.
Be prepared for this to be fairly expensive.
You’ll also need to obtain certificates from the contractors confirming the work done and any guarantees provided.
Even if the property has been underpinned, the scope of work and method need to be approved by each lender.
If you are armed with this information yourself, it will help your mortgage adviser when approaching lenders and discussing what they are willing to accept.
Once you’ve applied, the lender will conduct their own underwriting assessment, carefully reviewing the documents you’ve provided.
They will also instruct their own valuation to determine the property’s current market value, taking into account the subsidence history. The lender will then assess the risk associated with the property and decide whether to offer you a mortgage.
This process can take longer than standard applications due to the additional complexities.
There may also be some toing and froing, while they request additional documents and certificates.
Buying a property that has active subsidence
So how can you borrow money to buy a house that has active subsidence?
I’m not going to list the pros and cons of doing this. Most people buy these properties because they are cheap and there’s hopefully money to be made.
Just make sure you’ve done your homework.
Back to borrowing.
There’s two main ways to fund this type of purchase:
Bridging finance
Bridging lenders will give you money for pretty much any type of property. But they will only lend against their surveyors opinion of the property value. Maximum is generally 75% of that figure.
You will need to fund the other 25% plus the actual cost of repairs/underpinning.
Capital raising
You could borrow against other properties that you own to raise some or all of the money needed. Different types of property have their own maximum LTV, with most investment properties capped at 75%.
Your own home can normally be mortgaged up to around 90% LTV, but this will put your home at greater risk.
One more thing
If it is your intention to keep the property once the remedial work has been done, you will need an exit mortgage.
This is a long-term mortgage (buy to let/residential) that will take over the bridging loan.
You need to know that you can get approved for this mortgage, before you buy a house that has active subsidence.
Read more: Capital Raising Mortgages
How can a mortgage broker help?
A good independent mortgage broker will have access to over 100 lenders, meaning they can compare deals from across the wider market and find one that is tailored to your individual circumstances.
In addition, a mortgage broker can provide guidance and support throughout the entire process, from researching different options to submitting your application and negotiating with lenders.
This means you don’t have to worry about dealing with paperwork or making sure everything is in order – your broker will take care of it all for you.
Overall, using a qualified and experienced mortgage broker when buying a house that has had subsidence is essential if you want to get the best deal possible.
With their expertise and knowledge of the market, they can help make sure you get the right product at the right price.
Ready to explore your options?
If you’re just about to start your 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.
