Why Are Lenders Nervous With MMC Properties?

Lack of Historical Data

Many modern construction techniques and materials haven’t been around long enough to have a well-established track record. This makes it more difficult for lenders to assess the long-term durability and performance of MMC-built properties. Remember that lenders may want to take possession of a property in 30 years time and will want to know the property will still be standing.

Perceived Risks

There may be concerns about the potential for higher maintenance costs or unexpected issues with MMC properties. It is fair to say that this has occurred previously, think cladding, asbestos, RAC concrete etc. This uncertainty can make lenders cautious about responsibility for maintenance and overall risk associated with financing such properties.

Valuation Challenges

Valuing MMC properties can be more complex than traditional homes. Remember that valuers or appraisers will want to base values off of comparables, with less comparables on the market it becomes harder to ascertain value.

Regulatory and Insurance Issues

Some MMC techniques may not fully comply with existing building regulations, others will. This is an area that will resolve itself over time but may pose short term challenges for insurance providers, which then increases risk for lenders.

Overcoming Lender Concerns

While modern methods of construction offer potential benefits such as efficiency and sustainability, their novelty and potential risks make lenders cautious. However, what makes one lender cautious is an opportunity for another. Lenders recognise that future market share will require a USP meaning our specialist lenders are ideal for this type of property.

Specialist lenders will use different appraisers to view the property which helps overcome many of the other concerns also.

If you want to finance an investment property that has some element of MMC then get in touch, we are seeing:

• Up to 75% loan to value
• Competitive pricing
• Interest Only borrowing
• Different ownership models
• Fast decisions

Any questions on how to finance a MMC property, give us a call.

By Dave Farmer