Finance & Mortgages Properties Under 30 Sq Metres & Studio Flat Mortgages

The demand for living spaces in busy city centre locations has never been higher, with areas like Manchester and London serving as prime examples. To help serve this demand, some property investors offer small self-contained studios and other rental properties under 30 square metres.

If you’re considering buying or converting property into small units that will have less than 30 square metres of space, you’ll need to consider how you finance the project. Raising a mortgage for a small property isn’t easy, even for residential applicants. 

For landlords and business owners, securing commercial mortgages and other finance over a small property can be even more of a challenge.

Lots of lenders won’t provide finance for a property under 50 square metres. Fewer still will even consider property under 30 square metres, making it important that you know which lenders will entertain your application before you approach them.

Whatever type of property you need to finance, Rangewell can help. We know which lenders will consider units under 30 square metres and can negotiate on your behalf to secure a mortgage that suits your needs. 

Why are mortgages for properties under 30 sq metres challenging?

The main difficulty you face in mortgaging a small property is that lenders base their decisions on risk. A small unit is deemed a riskier purchase because it’s harder to sell on if you default on the loan. 

Smaller units are almost always designed to appeal to the rental market, where young professionals and students favour city-centre living and don’t mind sacrificing floor space. Lenders, on the other hand, need to sell your property quickly if you default on your mortgage – which makes small properties more of a risk. 

The size of the property isn’t the only factor that makes it a challenge. Other negative considerations include:

• Properties that lack kitchens/bathrooms and rely on shared facilities have poor resale value and will be harder to finance. 
• If your property has a shared entrance it is deemed less secure and more of risk. 
• Properties situated in niche buildings made of non-standard materials or built too high (taller than 7 storeys) are also more of a risk. 
• Look for time left on the lease as lenders won’t consider property with short lease periods. 

Aside from the property itself, lenders also look at your credit history, experience in the sector and projections or plans for the future. Each of these areas is an opportunity you may be able to use to convince lenders of the long-term value of your plans.

For example, if you’re looking for a commercial mortgage on a new small property and have previous experience in operating a HMO or block of flats, a lender will look more favourably on your application. 

If you also provide a business plan with clear projections around rental income and proven evidence of rental demand, you’ll have an even better chance of securing a loan at a stronger rate. 

Considerations for a mortgage on a 30 square metre property

If you’re planning to buy or build a small property, you need to run through this list of considerations to determine if it’s a good investment for your own business AND to demonstrate to lenders that you’ve understood their concerns and can demonstrate long-term value. 

• Facilities and intended use: most small units should be self-contained with all the necessary amenities for private tenants. However, some lenders will lend to landlords that offer units with shared facilities. You’ll need to tailor your approach based on the facilities your property offers. A lender may willingly finance a student flat with a shared kitchen, for example, but they may also decline a small studio flat intended for working professionals that shares a bathroom with neighbouring units. 
• Property value: a lender’s offer depends on property value, so you’ll need to get a clear valuation before applying. Some will only lend on properties valued at more than £100,000, whereas others will lend on cheaper ones. 
• Location: smaller properties are only desirable in areas where space is at a premium, such as city centres. Make sure you research the location and can see real demand for rental property before you commit. 
• Deposit: as a riskier investment, lenders may request a higher deposit when compared to more traditional properties. Be prepared for some to ask you to provide as much as 25-35% of the property. 

If any of these factors concern you, don’t worry – Rangewell can help you by finding lenders who already understand the smaller property and studio flat market and will review your application in full rather than rejecting it based solely on size. 

Finance for HMOs and student accommodation

We’ve mainly focused on finance for individual small properties, but ambitious landlords often buy or convert large properties and split them down into HMOs or student residential accommodation. This necessitates a different approach to lenders. 

If you intend to raise HMO finance, speak to Rangewell first and we’ll give you comprehensive advice on the entire process in a way that aligns with your long-term goals. 

Finance for small commercial units

If you're running a business, or intend to launch one and need a property that falls under 30 square metres, it can be hard to raise finance for the same reasons we've covered in this article. However, you'll have even more of a challenge because the value of the property will differ from the long-term business value it may represent.

To ensure you get a lender offer that accomodates for your business value rather than just the 'bricks and mortar' cost of the small unit, you'll need Rangewell's help. See this page on commercial mortgages to learn more about the process and apply today. 

How can Rangewell help?

Not only can we help advise you with valuable information about what impacts a lender’s decision like we’ve done in this guide, but we also have direct access to specialist lenders who will take the time to understand the true value of your potential investment. 

That means they won’t reject you out of hand and will instead allow Rangewell to present your case and show them any relevant business plans or information. We’ll make sure your application gets in front of lenders that know the rental market and can understand the benefits of smaller properties. 

Considering how selective the market can be, having our team on your side is an enormous benefit. If you want to secure mortgages on properties under 30 sq metres, speak to Rangewell today and get started.