A Complete Guide To Mortgages Refused Due To Flood Risk

If you’ve ever thought about buying a home in the UK, you’ll know it’s not all about cute cottages and lovely gardens. 

There are a few extra challenges, like the weather. 

And by weather, we mean rain – lots of it. That lovely drizzle we Brits love to grumble about can sometimes lead to flooding, and that’s where things get a bit more complicated.

Now, if you’re eyeing a property in a flood zone, you might be wondering, “Can I even get a mortgage for this place?” Well, you’re in the right place. 

We’re going to break down the ins and outs of getting a mortgage on a flood-risk property, what to do if your mortgage has been refused due to flood risk, and how flood zone 3 insurance works.

Can You Get a Mortgage on a Property in a Flood Zone?

Yes, you can. It’s not impossible, so don’t give up on that dream home by the river just yet. 

Even if you’ve had a mortgage refused due to flood risk before, there are still options out there. 

Yes, properties in flood zones can be a bit of a headache when it comes to insurance and lenders, but the good news is that you can still get a mortgage. 

You just need to tick a few extra boxes.

First, it’s helpful to understand that there are different levels of flood risk in the UK. 

The Environment Agency in England, along with Scottish Environment Protection Agency (SEPA), the Natural Resources Wales, and the Rivers Agency in Northern Ireland, have categorised properties into four zones:

• Zone 1: This is the least risky of them all – less than a 0.1% chance of flooding each year.
• Zone 2: A bit more of a chance here, with a 0.1% to 1% probability of flooding annually.
• Zone 3a: Now we’re getting into the “could be trouble” area, with a greater than 1% chance of flooding each year. Not ideal, but manageable if you’re careful.
• Zone 3b: This is the “functional floodplain”. Essentially, the area is meant to store floodwater, with over a 5% chance of flooding each year. It’s the riskiest of the lot and often makes lenders cautious.

If the property you’re interested in is in one of the riskier zones, especially 3a or 3b, lenders will want to know you’ve got insurance sorted to cover potential flooding. 

Flood zone 3 insurance can be a bit pricey, but there are ways to get more affordable coverage—more on that in a sec.

How Does Flood Insurance Affect Your Mortgage Application?

Right, so you’re all set to buy a home, and you’ve got your heart set on a property that’s in a flood zone. What’s next? 

Well, one of the biggest stumbling blocks for getting a mortgage on a flood-risk property is the insurance. 

Here’s why:

Mortgage lenders want to make sure that if anything goes wrong with your new home, they won’t be left out of pocket. 

So, they’ll require you to have buildings insurance, which typically includes flood cover. 

The tricky bit is that not every insurance company is keen to cover properties at risk of flooding—and even if they do, the premium can be sky-high. 

But fear not—there’s some help on hand in the form of Flood Re. 

Flood Re is a joint initiative between the government and insurance companies that helps to make flood insurance more affordable for homeowners in high-risk areas. 

It works by effectively capping the cost of premiums for properties in flood zones, which can be a real lifesaver when it comes to getting that mortgage approved.

The key here is that without proper flood insurance, most lenders simply won’t approve your mortgage. 

So, if you’re having trouble, make sure to check out what’s available under the Flood Re scheme. 

What to Do if Your Mortgage Is Refused Due to Flood Risk

Alright, so let’s say you’ve put in a mortgage application, and the dreaded email comes back: mortgage refused due to flood risk. 

First off, don’t panic. It’s not the end of the road. Here’s what you can do:

1. Find Out Why – First, understand exactly why your mortgage was refused. Was it just because of flood risk, or were there other issues like your credit score or income? Knowing this helps you take the right steps next.
2. Check Your Insurance Options – The refusal might be because you didn’t have the right flood insurance. Go back to your insurance provider or shop around for quotes that meet the lender’s requirements. Make sure to look into the Flood Re scheme if you’re in a high-risk area.
3. Speak to a Broker – If you haven’t already, get in touch with a mortgage broker who specialises in flood-risk properties. They know the best lenders for your situation and can help you get the insurance you need.
4. Don’t Keep Reapplying – It’s tempting to try another lender straight away, but hold on. Multiple applications in a short time can hurt your credit rating. Take a breather, understand what went wrong, and then reapply with the help of a broker.

Tips Before Buying a Property in a Flood Zone

If you’re still interested in buying a home in a flood zone, you need to prepare.

Here are some simple tips to help you be ready:

• Get a Flood Report – Before you go any further, ask your solicitor for a detailed flood report. This will tell you everything you need to know about the flood risk for the property.
• Look Into Flood Defences – Some properties in high-risk areas have flood barriers or other defences in place. This can help reduce your insurance costs and make your mortgage application more appealing to lenders.
• Consider the Costs – Make sure you understand the additional costs involved, like higher insurance premiums and potentially having to install your own flood barriers. If the property is in flood zone 3, insurance could be a bit of a budget-buster, so make sure it’s financially viable.
• Speak to the Neighbours – If you can, have a chat with the neighbours. They’ll often give you a more realistic view of what it’s like living in a flood zone, beyond what the estate agent might tell you.

How Can a Mortgage Broker Help?

Whole of market mortgage brokers can be your best friends when it comes to buying a property in a flood-risk area. Here’s what they can do for you:

• Find mortgage options that work for properties in flood-risk areas.
• Connect you with lenders who understand the challenges of buying in a flood zone.
• Help you understand the insurance you need for properties at risk of flooding.
• Talk to lenders to get the best rates and terms for you.
• Give advice on reducing risks and meeting lender requirements.
• Guide you through the paperwork to make the process easier.
• Explain how flood risks affect your mortgage and insurance costs.
• Help you understand any government flood programs or incentives.
• Compare different mortgage offers and show you the pros and cons.
• Explain all the costs, including insurance and flood-related expenses.

A good broker will not only help you find the best deal but also assist with your insurance, making sure you’re covered for flooding—without breaking the bank.

The Bottom Line

Purchasing a home in a flood zone isn’t impossible, but it certainly presents unique challenges. Securing flood insurance and finding a willing lender are the two main hurdles.

With proper preparation, a reliable broker, and perseverance, you can secure the mortgage you need – and perhaps even snag your dream home at a bargain price.

Flood zones might seem daunting, but with the right knowledge and support, it’s entirely achievable. Sort out your flood insurance, work with a broker, and before you know it, you could be relaxing on your new porch, watching the rain fall without a worry.

Get in touch with us and we’ll connect you with a qualified mortgage broker who can help you find lenders willing to finance high-risk properties.