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Mortgage Declined Due To "student Area"

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We've just had our mortgage provider turn down our application because "almost all the houses in the area are HMOs let to students" and there is a "very low level of owner occupation". Our broker seems to think that most high street lenders are going to have a similar reluctance to lend on the property, though he's currently looking around for an alternative.

Leaving aside the inconvenience and expense of hunting out a mortgage provider who is willing to lend, all this has made me wonder if the property is a wise purchase. Searching online, it seems the local area apparently has close to a 90% student population. The area has also been under an Article 4 Restriction for the last couple of years (meaning that it can't be converted into a student let), which I've been advised has adversely affected property values.

It looks like a really nice area where we'd be happy to live, and we love the house itself, but it seems inevitable that all this is going to affect the resaleability of the property. As first time buyers, I'm having a great deal of trouble assessing whether the price we're paying is reasonable, or whether we're effectively handing over our life savings to bail the current owner out of a hole. Can anyone offer us any advice on the situation?

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:lol:

Try joining MSE

I'm a member at MSE. If this is some form of sarcasm, it's somewhat lost on me.

Can anyone offer us any actual advice on the situation?

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I'm a member at MSE. If this is some form of sarcasm, it's somewhat lost on me.

Can anyone offer us any actual advice on the situation?

Errrr.... yes... look at the name of the site. You might understand there could be a little bit of bias! :P

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We've just had our mortgage provider turn down our application because "almost all the houses in the area are HMOs let to students" and there is a "very low level of owner occupation". Our broker seems to think that most high street lenders are going to have a similar reluctance to lend on the property, though he's currently looking around for an alternative.

Leaving aside the inconvenience and expense of hunting out a mortgage provider who is willing to lend, all this has made me wonder if the property is a wise purchase. Searching online, it seems the local area apparently has close to a 90% student population. The area has also been under an Article 4 Restriction for the last couple of years (meaning that it can't be converted into a student let), which I've been advised has adversely affected property values.

It looks like a really nice area where we'd be happy to live, and we love the house itself, but it seems inevitable that all this is going to affect the resaleability of the property. As first time buyers, I'm having a great deal of trouble assessing whether the price we're paying is reasonable, or whether we're effectively handing over our life savings to bail the current owner out of a hole. Can anyone offer us any advice on the situation?

The first step should be to look at the prices of what similar properties have sold for recently. The problems and restrictions you are encountering could be reasons to negotiate the sale price down further - but obviously no good if you cannot raise any kind of mortgage on it.

Also if it is a known student area make sure you visit it at peak student times e.g. late night during freshers week and then see if you still like it. 9am on a Saturday morning is not likely to give you much of an indication of what the area is really like.

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Sure this won't be as good as the advice over on MSN but lets have a go! :)

We've just had our mortgage provider turn down our application because "almost all the houses in the area are HMOs let to students" and there is a "very low level of owner occupation". Our broker seems to think that most high street lenders are going to have a similar reluctance to lend on the property, though he's currently looking around for an alternative.

Ok, so that doesn't sound good. But what is your situration now? Can you carry on renting? Are there any other areas you would like to live? If lenders won't lend maybe that means you need to knuckle down and save a bit more.

Leaving aside the inconvenience and expense of hunting out a mortgage provider who is willing to lend, all this has made me wonder if the property is a wise purchase. Searching online, it seems the local area apparently has close to a 90% student population. The area has also been under an Article 4 Restriction for the last couple of years (meaning that it can't be converted into a student let), which I've been advised has adversely affected property values.

Ok, I have no idea what a Article 4 is! or how that will affect prices? Is it a wise purchase? I don't know? What is the yield if you rented out the house as a HMO to students yourself?

The truth is, if you like the area and you feel you and your family would be happy living there, then just go for it. If you are living there long term and you can afford the mortgage repayments (with a health dose of realism baked into possible interest rates rises!) then the value of the house is in the living in it! Don't worry about the short term movements in house prices (was that MSN enough! :P). Remember that in the long run, all fiat money will go to a value of '0'!

It looks like a really nice area where we'd be happy to live, and we love the house itself, but it seems inevitable that all this is going to affect the resaleability of the property. As first time buyers, I'm having a great deal of trouble assessing whether the price we're paying is reasonable, or whether we're effectively handing over our life savings to bail the current owner out of a hole. Can anyone offer us any advice on the situation?

As I said, think long term. Noone knows what will happen to house prices in a years time. 20% up, 50% down (see that HPC bias :P). Think about how you would deal with these situations? Still happy with the place, well if you love it that much then you know what you need to do! :)

Edited by renting til I die

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Also if it is a known student area make sure you visit it at peak student times e.g. late night during freshers week and then see if you still like it. 9am on a Saturday morning is not likely to give you much of an indication of what the area is really like.

+1, this is very good advice. It's a bit late for freshers week but check it out in the evenings (and early mornings) and see if the area is still livable.

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The first step should be to look at the prices of what similar properties have sold for recently. The problems and restrictions you are encountering could be reasons to negotiate the sale price down further - but obviously no good if you cannot raise any kind of mortgage on it.

Also if it is a known student area make sure you visit it at peak student times e.g. late night during freshers week and then see if you still like it. 9am on a Saturday morning is not likely to give you much of an indication of what the area is really like.

That's what's making the whole thing so tricky really - it's a bit of a unique property, so difficult to compare to anything nearby. As far as visiting the area, we already live nearby as it happens, so we're pretty familiar with it. Although it's certainly student-central in the overall vicinity, the road the house is on and its surrounding roads are very nice. We're not really worried about it being a nice place to live, I'm just getting paranoid that we might be being a bit naïve financially.

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Errrr.... yes... look at the name of the site. You might understand there could be a little bit of bias! :P

A touch of pessimism (realism?) is fine by me, I'm beginning to wonder if the best thing right now would be to be scared off from this purchase. The trouble is, as a first-time buyer I've no idea if I'm just being paranoid, or if I should listen to my instincts!

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Sure this won't be as good as the advice over on MSN but lets have a go! :)

Ok, so that doesn't sound good. But what is your situration now? Can you carry on renting? Are there any other areas you would like to live? If lenders won't lend maybe that means you need to knuckle down and save a bit more.

Ok, I have no idea what a Article 4 is! or how that will affect prices? Is it a wise purchase? I don't know? What is the yield if you rented out the house as a HMO to students yourself?

The truth is, if you like the area and you feel you and your family would be happy living there, then just go for it. If you are living there long term and you can afford the mortgage repayments (with a health dose of realism baked into possible interest rates rises!) then the value of the house is in the living in it! Don't worry about the short term movements in house prices (was that MSN enough! :P). Remember that in the long run, all fiat money will go to a value of '0'!

As I said, think long term. Noone knows what will happen to house prices in a years time. 20% up, 50% down (see that HPC bias :P). Think about how you would deal with these situations? Still happy with the place, well if you love it that much then you know what you need to do! :)

Certainly we could carry on renting, but it seems like the right time for us to buy, as we have a good majority of the purchase price saved right now. As for other areas to purchase in, there are a few, but they're all fairly studenty areas too. Once you eliminate the really posh areas and the really rough areas, it seems there's only student areas left around here.

Renting out the house ourselves isn't an option even as a backup plan, sadly... that's what Article 4 is all about, restricting the conversion of houses into rented HMOs. That might change in the future, but who knows what will happen?

I'm sure we'd be happy living there, and with the deposit we have saved up I'm reasonably comfortably with the mortgage whatever happens to interest rates. I'm just concerned if we might be screwed if we suddenly needed to move in the near future, and found ourselves entirely unable to sell the place.

Many thanks for the advice everyone BTW, I'm grateful for any guidance I can get right now!

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"I'm sure we'd be happy living there, and with the deposit we have saved up I'm reasonably comfortably with the mortgage whatever happens to interest rates. I'm just concerned if we might be screwed if we suddenly needed to move in the near future, and found ourselves entirely unable to sell the place."

Have a look at London etc where the housing market has already peaked. There is another question you should be asking yourself.

Am I prepared to accept a drop in the house price that could wipe out all or most of the deposit I put in?

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The people who make money by lending out money will not lend you any money to do what you propose and yet you still wonder if you are somehow naive?

I don't need to be sarcastic (as I was not before), this stuff just writes itself.

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"I'm sure we'd be happy living there, and with the deposit we have saved up I'm reasonably comfortably with the mortgage whatever happens to interest rates. I'm just concerned if we might be screwed if we suddenly needed to move in the near future, and found ourselves entirely unable to sell the place."

Have a look at London etc where the housing market has already peaked. There is another question you should be asking yourself.

Am I prepared to accept a drop in the house price that could wipe out all or most of the deposit I put in?

Well no, I wouldn't be prepared to accept that, since we have 75% of the purchase price as a deposit. Seeing that wiped out would be a little harsh. That's part of why I'm so surprised to see the provider reluctant to lend. Can they really think that it's a risk they wouldn't get their 50K back if things went tits-up?!

We wouldn't be too devastated to lose say 10K, or even 20K if it comes down to it, since we're pissing that amount away every couple of years in rent anyway.

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The people who make money by lending out money will not lend you any money to do what you propose and yet you still wonder if you are somehow naive?

I don't need to be sarcastic (as I was not before), this stuff just writes itself.

Thanks, that's really helpful.

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