How To Finance A Modern Method of Construction Property

Modern Methods of Construction (MMC) Financing MMC Properties (1)How To Finance A Modern Method of Construction Property

Alternative construction methods in the UK, such as modular homes or other non-traditional building techniques, are gaining focus with 17% of all new builds now adopting some form of Modern Method of Construction (MMC) and that is set to increase.

The big question we get asked is how simple it is for investors to raise mortgage finance on these properties. The simple answer is that it takes some expertise but the mortgage options are growing and lenders becoming more comfortable with MMC properties.

We have lenders offering up to 75% loan to value, flexible loan conditions and a genuine appetite to lend.

To easier access finance you need to understand why some lenders can be hesitant, if we cover these parts off then the whole process opens up and access to mortgages for MMC properties becomes simpler.

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