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5 reasons your mortgage application for a flat could be rejected


Figures suggest that demand for flats is rising. They can be a great option for first-time buyers, as they’ll often have lower prices, for those who want to live in city centres, or even for those who want to invest in property. While the process of buying a flat is similar to a home, it can create more obstacles if you’ll be using a mortgage to purchase one.

For much of 2020, house prices increased at a faster pace than flats as families sought larger homes, while first-time buyers struggled to secure a mortgage as the number of low-deposit mortgages fell. However, according to the Halifax House Price Index, this changed in 2021. While detached properties increased by 6.6% last year, annual price inflation for flats was 10.8%. The figures suggest that demand for flats is on the rise.

If you’re thinking about buying a flat this year and will be applying for a mortgage, some things could harm your mortgage application. It doesn’t mean you can’t purchase a flat, but being forewarned can help you find the right property for you and approach lenders that are more likely to say “yes”.

Here are five reasons why a bank could reject your mortgage application for a flat.

1. The leasehold is too short

If you buy a flat, it will usually be a leasehold property. This means you own the property, but the land it’s built on is owned by a freeholder. The leasehold gives you the right to occupy the property for a defined period.

Many lenders will not approve your mortgage if there are less than 70 years on the leasehold. Some may also need you to pay off the mortgage before the lease reaches a certain point. It’s important you check the leasehold and understand the criteria lenders have before you apply.

If you’re interested in buying a property with a short leasehold, the current leaseholder may be able to extend it. Keep in mind that this may increase the value of the property, or they may ask that you cover the associated costs.

2. The ground rent and service charges are high

When you apply for a mortgage, a lender will carry out affordability checks. This is to ensure you can meet the regular repayments of both your mortgage and your other outgoings, such as bills and credit repayments. If you’re buying a flat, you will typically need to pay ground rent and service charges. As a result, the lender will consider their cost and how they could rise in the future when they review your application.

3. Potential cladding issues

In the wake of the Grenfell Tower fire in 2017, cladding and fire safety have become important issues if you’re buying a flat. Some lenders will require an EWS1 form before an application is approved. This form shows that an assessor has looked at a property’s external cladding. Some older properties may not have this, and it can delay the home buying process, or even mean that a lender will not approve your application.

4. You don’t have the deposit needed

Traditionally, first-time buyers have needed a 10% deposit when buying a property. There are also mortgages now available where you need just a 5% deposit. If you’ve saved with this in mind, you could find you don’t have enough if you want to buy a flat.

Banks may view flats as harder to resell if they are repossessed. As a result, some lenders may require a higher deposit to offset this risk.

5. The property is above commercial premises

If you’re looking at a flat that is above commercial premises, keep in mind that some lenders will not approve a mortgage based on this. This is because some commercial properties can mean more noise or anti-social behaviour, and they could prove more difficult to resell. If you find a property that is above commercial premises that you want to buy, you may have to look at challenger banks or specialist lenders to secure a mortgage.

Finding a lender that will approve your mortgage application for a flat

While the above five issues can mean it’s more difficult to get a mortgage, it doesn’t mean you have to scrap your plans to buy a flat. What is important is that you understand the criteria of different mortgage providers and choose one that suits your goals.

There are many providers to choose from, from well-known high street banks to lenders you may never have heard of. It can be challenging to understand which one is right for you, and this is where a mortgage broker can help. We’re here to help you identify the lenders that could approve your application, whether you hope to purchase a flat or house. Please contact us to talk about your mortgage needs.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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      Spinningfields Lifetime Partners Limited is an appointed representative of Quilter Financial Services Ltd and Quilter Mortgage Planning Ltd, which are authorised and regulated by the Financial Conduct Authority. Spinningfields Lifetime Partners Ltd is registered in England and Wales. Registered Number 11412273, Directors: J Butler, M Headen, P Merrigan, U Ozturk. Registered Office: 12-14 Upper Marlborough Road, St Albans, Herts, AL1 3UR.