BTL with an EPC F (37)

[Seamus]

Hi,

I’m looking to buy a 3 bed bed terrace with an F EPC rating.  Would this property be mortgagable? Or would it have to be a cash buy? 

It’s just two points outside of the E range. 

It has central heating but poor insulation. 
 

Thanks,

Seamus

 

[Lilla D]

Hi Seamus,

Cash buy, bridging or high risk mortgage application with one of only a handful potential lenders subject to other criteria, valuer's comments and underwriter's discretion... Is it possible to do some works before the valuer goes out to get the EPC rating to E?

[EvolutionBlogger]

5 hours ago, Seamus said:

I’m looking to buy a 3 bed bed terrace with an F EPC rating.  Would this property be mortgagable? Or would it have to be a cash buy? 

It’s just two points outside of the E range. 

It has central heating but poor insulation. 

 

It's not currently lettable with an EPC of F, so a lender would surely raise issues. How expensive is it bring the property up to compliance? 

[Seamus]

Hi Vineet, it’s only two points outside if E so it shouldn’t be too hard to do.  But does that mean I need to buy in cash and then upgrade, get a new EPC and then remortgage after owning for 6 mths?  That’s something I would rather avoid as I am just short of the cash needed to buy it.  For the sake of being two points short I’m wondering if some lenders would be more lenient. 

[Kerry Chan]

Hi @Seamus

The current policy direction in terms of EPC is that residential properties cannot be let, unless the EPC is C or above.  The only question is when this is coming in.  The earliest that has been discussed is 1 Apr 2023 (for new tenancies).

In addition to the above letting requirement, there are another two considerations:

1.  the government's net zero policy - it is effectively going to ask lenders to ensure that their property security portfolio to have EPC grade C or above by 2028, but the dates / directions are not finalised yet; and

2.  the environmental, social and governance (ESG) reporting requirements that are coming in for lenders by 2023, which means that lenders will be obliged to disclose / analyse their property security portfolio EPC performances.  Whilst details are not fully in place, I would be surprised if lenders don't start imposing EPC requirements, as to whether they would lend to properties lower than C, from the relevant time.

In short, unless you are receiving a very substantial discount on the property that has its EPC rated F (and has the potential to go into C at least), and/or you have enough cash to fund the property / work / higher payments whent the property is not mortgageable, I would personally skip this property - since it is the seller's problem to fix all these if the seller wants to achieve better pricing or sell.

Hope these helps.

For the avoidance of doubt, the above (a) does not constitute legal advice (and no lawyer-client relationship is formed in any way) and (b) is set out for your reference only.  You should seek formal legal advice and appropriate professional advice (such as from a mortgage broker) for your matter.

Kerry

[Seamus]

Thanks Kerry, lot to think about there.  I’m waiting to hear back from my broker and the agent to discuss options.  The house is up for £160k but already has two offers at £175k both mortgage buyers although they agent couldn’t confirm if they were investors or looking for a home. 

[mortgageinfo]

Hi Seamus,

A few specialist Lenders offer Refurbishment BTL's, for cases like this. You essentially take a Bridge, and once the works are completed you move onto one of the Lenders BTL products. More expensive than a standard BTL, but it's an alternative to cash buy. Or just an ordinary Bridge as mentioned above.

 

[Seamus]

Thanks J.  That’s quite interesting.  I’m happy to spend up to £10k now to make it more energy efficient and while I’m doing some renovations. I had applied to the green homes grant on another house but that was a nightmare. For this one I might just get a few quotes and do it.  Provided I get the house. It’s going to best and final bids.  I have a feeling that despite the F issue,  in this market it will go £20k + over asking price. 

[Seamus]

On 1/17/2022 at 10:46 AM, mortgageinfo said:

Hi Seamus,

A few specialist Lenders offer Refurbishment BTL's, for cases like this. You essentially take a Bridge, and once the works are completed you move onto one of the Lenders BTL products. More expensive than a standard BTL, but it's an alternative to cash buy. Or just an ordinary Bridge as mentioned above.

 

Yes that’s an option but an expensive one.  My broker is talking to two lenders who are interested in potentially lending, 1.8% - 2% 2 yr fixed.  Definitely my preferred option.

[mortgageinfo]

Did you have any luck with these Lenders Seamus?

[Seamus]

Hi, in the end my offer was not successful. When viewing the building I noticed some cracks.  I managed to get further information on these through the agent. It said that the front wall might need rebuilding and some ties installed. So I made my offer conditional on the out come of a full structural report.  I think this would have affected my bid.

So unfortunately with an EPC F rating and cracks that needed more investigation the risk was too great.  If the cracks were as bad as they sounded then I wouldn’t be able to get building insurance and therefore not mortgagable. 

[EvolutionBlogger]

On 1/18/2022 at 1:49 PM, Seamus said:

Thanks J.  That’s quite interesting.  I’m happy to spend up to £10k now to make it more energy efficient and while I’m doing some renovations. I had applied to the green homes grant on another house but that was a nightmare. For this one I might just get a few quotes and do it.  Provided I get the house. It’s going to best and final bids.  I have a feeling that despite the F issue,  in this market it will go £20k + over asking price. 

why do you want to take a risk on this property. Is it an amazing deal? Can't you find an alternative property without this issue?

[Seamus]

I didn’t get the house in the end.  I found out that some cracks in the wall near the cellar door were more serious than first thought so I put a few conditions on my offer. The seller went for another bid which didn’t have any conditions on it. But overall it was too risky so it was for the best. Finding good deals are difficult atm but I’ll keep looking.