The UK’s climate is evolving, bringing with it more frequent extreme weather events and rising sea levels.
Consequently, the risk of flooding is a growing concern for many homeowners and prospective buyers, particularly for those dreaming of properties near rivers or coastlines.
Lenders understandably exercise caution when assessing properties in flood-risk areas.
But don’t let the fear of flooding dampen your property dreams. With the right information and preparation, getting a mortgage on a flood-risk property is achievable.
This guide will walk you through the process, equipping you with the knowledge needed to make better decisions.
Understanding Flood Risk Zones
In the UK, the Environment Agency has developed a classification system to identify areas prone to flooding.
This system comprises four distinct zones, each representing a different level of risk:
Flood Zone 1
Properties here have the lowest probability of flooding, with less than a 0.1% chance annually. This translates to a one-in-a-thousand chance of a flood occurring in a given year.
Mortgages for Zone 1 properties are usually straightforward, with minimal lender restrictions.
Flood Zone 2
The risk of flooding increases moderately in Zone 2. These properties face a 0.1% to 1% chance of river flooding and a 0.1% to 0.5% chance of coastal flooding annually.
While obtaining a mortgage is still feasible, lenders may require additional measures such as specific insurance to mitigate the risk.
Flood Zone 3a
This zone signifies a high risk of flooding, with an annual probability exceeding 1% for both river and coastal flooding.
Securing a mortgage here can be more complex, often requiring specialist lenders and comprehensive insurance.
Flood Zone 3b
Also known as the ‘Functional Floodplain,’ Zone 3b represents the highest risk, with an annual flood probability exceeding 5%.
Properties and land in this zone often play a role in natural flood management, making mortgages difficult to obtain and necessitating extensive flood mitigation measures.
You can find out a property’s flood risk zone by using the government’s online flood risk map and entering the postcode.
However, it’s important to go beyond this initial check.
Talk to local residents and review historical flood data to gain valuable insights into past floods and the effectiveness of existing flood defences. This information will give you a more comprehensive understanding of the property’s true flood risk.
How Flood Risk Affects Your Mortgage
When you apply for a mortgage on a property located in a flood risk zone, lenders will carefully assess the level of risk involved.
This assessment includes evaluating the property’s designated flood zone, requiring a comprehensive flood risk assessment to gauge the property’s specific vulnerability, and ensuring the property has adequate insurance against flood damage.
Lenders will also consider the property’s value and your affordability, factoring in the potential impact of flood risk on the property’s value and the cost of insurance premiums.
Buyers seeking mortgages for flood-risk properties may face challenges such as limited lender options, stricter lending criteria, and higher insurance premiums. However, you can improve your chances of approval by working with a specialist mortgage broker.
Additionally, consider investing in flood resilience measures for the property, which can demonstrate your commitment to protecting your investment and can make lenders more willing to approve your mortgage.
Can you be refused a mortgage due to flood risk?
Yes, it is possible to be refused a mortgage due to flood risk.
Lenders may decline your mortgage application if they believe the property’s value could be significantly reduced by flooding, making it harder to sell in the future.
Some may impose stricter lending criteria, a higher deposit and/or require comprehensive flood insurance coverage.
Flood Insurance: Protecting Your Investment
Flood insurance is a vital safeguard for properties located in flood risk zones.
While standard home insurance policies typically exclude flood damage, having a dedicated flood insurance policy can provide financial protection and peace of mind in the event of a flood.
There are two main types of flood insurance coverage:
Buildings insurance
This covers the structure of your property, including walls, roofs, foundations, and permanent fixtures.
It typically includes the cost of repairs or rebuilding in case of flood damage.
Contents insurance
This covers your personal belongings within the property, such as furniture, appliances, electronics, and clothing.
It can help you replace or repair damaged items due to flooding.
For properties in high-risk flood zones, the Flood Re scheme can make flood insurance more affordable.
This government-backed initiative aims to make flood insurance accessible to eligible homeowners by capping premiums and ensuring availability. To be eligible for Flood Re, the property must have been built before 1 January 2009, be in council tax bands A-H, and be used for residential purposes.
Flood Resilience Measures
While the prospect of flooding can be concerning, there are practical steps homeowners can take to safeguard their properties and minimise potential damage.
Property Modifications
Raising electrical outlets, appliances, and valuable belongings to higher levels can help protect them from floodwater damage. Consider using flood-resistant materials for flooring and walls, and installing non-return valves on drains and pipes to prevent sewage backflow. You can also varnish wooden skirting boards or install water-resistant plastic skirting boards. Air brick covers can be fitted to stop flood water entering, but ensure you remove them once the flooding has passed to allow the bricks to dry out.
Flood Barriers and Defences
Installing flood barriers, such as flood gates or removable barriers, can help prevent water from entering your property. These barriers can be temporary or permanent and are available in various sizes and materials to suit different needs. Sandbags can also be used as a temporary measure.
Landscaping and Drainage
Ensure proper drainage around your property to direct water away from the building. Consider planting vegetation that can help absorb excess water and reduce surface runoff.
Not on the High Street!
The high street lenders can’t help every mortgage customer and they prefer the simple, low-risk ones.
If your situation is a bit different or needs a more personalised solution then our brokers can help.
Expert advice, for all situations.
Bridging Loans
The most flexible of secured loans and often misunderstood. Bridge loans can be used in so many different ways and can be arranged super fast.
Large Loans
High net worth mortgage brokers understand complex large loans and unique situations and can source bespoke deals from the right lenders.
Let to Buy
Let to buy combines a buy to let remortgage with a residential mortgage. Allowing you to move house while keeping your current home.
Working with a Specialist Broker
Finding a suitable mortgage for a property in a flood risk zone can be complex and time-consuming.
This is where the expertise of a specialist mortgage broker can be invaluable.
Specialist brokers possess in-depth knowledge of the unique challenges and requirements associated with flood risk properties, significantly increasing your chances of securing a mortgage.
Access specialist lenders
They have established relationships with lenders who are more open to considering properties in flood risk zones, expanding your options beyond mainstream lenders.
Negotiate favourable terms
Brokers can leverage their expertise and industry connections to negotiate competitive interest rates and terms tailored to your specific circumstances and the property’s flood risk.
Secure appropriate insurance
They can assist you in finding comprehensive flood insurance coverage that meets both your needs and the lender’s requirements, ensuring your investment is protected.
Provide expert guidance
Brokers offer personalised advice and support throughout the entire mortgage process, simplifying complex procedures and helping you make better decisions.
The Role of Professionals in Assessing Flood Risk
When purchasing a property in a flood risk zone, there are other professionals who can help to assess the potential risks involved.
Both surveyors and solicitors play key roles in this process, providing valuable insights and guidance.
Surveyor’s Assessment
A surveyor will conduct a physical inspection of the property and its surroundings, looking for any signs of previous flooding, such as watermarks or dampness.
They will also assess the property’s location relative to water bodies, slopes, and drainage systems. In some cases, they may recommend a professional flood risk assessment to evaluate the property’s specific vulnerability to flooding, taking into account factors like elevation and the presence of flood defences.
The surveyor’s report will detail their findings and any recommendations, providing crucial information for both you and your mortgage lender.
Solicitor’s Due Diligence
Your solicitor will conduct environmental searches, which may include a flood risk report detailing the property’s flood zone, historical flood data, and potential future risks.
They will also review the seller’s property information form (TA6) to ensure any history of flooding has been disclosed.
Your solicitor will advise you on the legal implications of buying a flood risk property, including potential insurance or resale issues, and ensure the seller has met their legal obligations regarding flood risk disclosure.
Additional Considerations
It’s important to acknowledge that properties in flood risk zones are likely to experience a decrease in value compared to similar properties in lower-risk areas.
Additionally, reselling such a property might pose challenges, as potential buyers may be hesitant due to the perceived risk.
So before committing to a purchase, find out as much as you can about the risks and the costs. The property you want to buy may be available at an attractive price but the consequences of buying the wrong property could cost you thousands.
Obtaining a mortgage on a flood risk property may present unique challenges, but it’s certainly not an insurmountable obstacle.
By understanding flood risk zones, securing comprehensive insurance coverage, and working with a specialist mortgage broker, you can secure the mortgage you need.
Remember to research the property’s flood risk, invest in flood resilience measures if necessary, and partner with professionals who can guide you through the mortgage application.
We work with one of the largest and most experienced independent mortgage brokers in the UK.
They have been in the mortgage industry for over 45 years, so they understand the challenges that clients can face when looking for a mortgage.
With qualified advisers based across the UK, they have the experience and expertise to help guide you through the complex process of buying a house, remortgaging, raising bridging finance or investing in the property market. Fully FCA regulated, they have more expertise across more lending solutions than any other broker and have specialist teams in place to work with clients through every stage of their journey.
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.
