My daughter took out a mortgage two years ago with a fixed interest rate of 3.05 percent. This deal is expected to end shortly.
We are concerned because when my daughter purchased the house we discovered an issue that was not highlighted in the survey.
We recently decided to install solar panels and wall insulation to make the house more energy efficient – but the company we hired said they couldn’t do the work because they had spray foam insulation in the attic.
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The original survey was conducted by the mortgage lender and there was no evidence of this.
Apparently many Mortgage lenders will not lend on properties that have this foam, so it could be difficult to sell the property or remortgage.
As the debt restructuring deadline approaches, we fear she will be forced to stay with the same lender, possibly at a less favorable interest rate.
From what we’ve read online, the only way to fix this problem is to remove the spray foam at huge expense. What would you advise? By email
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David Hollingworth answers: When taking out a mortgage, there are two main elements that need to be met to satisfy the lender before they can make a formal offer.
The first is that the borrower can meet the lender’s requirements. The second element is that the lender wants to be sure that the property represents suitable security for the mortgage.
This ensures that the property is worth the amount paid for it and that its structure and condition are in good condition.
This protects the lender’s interests in the event that the borrower is unable to make payments and the property is ultimately repossessed.
The appraisal of the property gives the lender the confidence that, should the worst happen, they can sell the property and pay off the outstanding mortgage with the proceeds.
> What’s next for mortgage rates and should you correct them?
Not all reviews are created equal
As part of the application process, a lender will therefore order a valuation.
In some cases the borrower has to pay for this, although many mortgage agreements offer incentives in the form of a free basic valuation.
The base valuation is for the lender’s purposes only and does not constitute a detailed report.
It may highlight obvious and serious issues that could potentially help a buyer, but is not intended to protect the buyer’s interests.
A valuation may not always involve a physical inspection of the property.
Although more likely to be a purchase than a remortgage, in certain circumstances it is possible for a lender to rely on an automated valuation or a ‘drive-by’ valuation, where the appraiser visits the property but does not have access has on it.
It is therefore generally advisable for the buyer to commission a second, more detailed report, be it a homebuyer report or a full building survey.
The mortgage lender may have offered an option or suggested ordering a separate appraisal.
Both are more expensive than a basic appraisal, but produce a more detailed report to alert the buyer to potential problems.
This can be a worthwhile expense as it can avoid surprises further down the line and make it easier to understand potential maintenance needs.
> Check how much you would pay with our best mortgage rates calculator
In-depth: Mortgage lender surveys are not always about someone walking into the property. Therefore, homebuyers are advised to obtain a second, more detailed report
What’s the problem with spray foam insulation?
Energy efficiency is clearly high on your daughter’s priority list.
Spray foam insulation is designed to help improve the energy efficiency of the property, which is a positive thing in times of higher energy costs.
However, spray foam can potentially cause problems for a property if it traps condensation in the attic space.
Of course, this is more likely if installed incorrectly and can ultimately cause the roof beams to begin to rot if the roof is unable to breathe properly.
As a result, lenders may not be interested in lending where they exist.
This can be particularly the case if the wood is completely encapsulated in the foam.
Foam may even be used to extend the life of a failing roof.
However, not all lenders would necessarily rule out lending if spray foam is present.
You want the appraiser to evaluate the application of the foam and whether it could compromise the structural integrity of the roof.
It will be helpful if your daughter has a certificate of the work as well as any warranties issued at the time of installation.
Some lenders simply rely on the appraiser’s comments when deciding whether to take out a loan, while others may express their expectations in more black and white terms.
Your roof needs to breathe: Spray foam can cause roof beams to rot if it traps condensation
Because it can be difficult for an appraiser to assess the structure of the roof, a specialist report may be necessary.
This may not be a problem in a remortgage where an application is unlikely to ask about spray foam and may not even have a physical assessment.
Alternatively, your daughter can switch interest rates with her existing lender, which does not require an assessment.
However, it would be much more likely that she would raise her head if the property were sold.
It’s worth checking the original assessment again to see what type of assessment it was and whether foam was detected as present.
You can contact the expert who carried out the valuation. However, be prepared that the valuation may be outside the scope of the report if it is a basic report for the lender.
You have a complaints procedure in place if you wish to make a complaint.
For peace of mind, it may be helpful to carry out tests to ensure that the foam is not having a negative impact on the roof structure, which could ultimately require a new roof if left unchecked.
Given the potential problems with spray foam, the Royal Institution of Chartered Surveyors (Rics) has a consumer guide which can be a useful starting point.
GET AN ANSWER TO YOUR MORTGAGE QUESTION
David Hollingworth is This is Money’s mortgage expert and broker at L&C Mortgages – one of the UK’s leading specialists.
He’s ready to answer your home loan questions, whether you’re buying your first home, trying to remortgage amid interest rate chaos or planning further into the future.
If you would like to ask him a question about mortgages, email firstname.lastname@example.org with the subject line: Mortgage Help
Please provide as much detail as possible in your question so that he can respond in detail.
David will do his best to respond to your message in an upcoming column, but he will not be able to respond to everyone or correspond privately with readers. Nothing in his answers constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
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