Which lenders issue overage clause mortgages on properties?

Tags: Properties with land and country house mortgages, Residential mortgages

Quick Summary

Overage clause mortgages can be difficult to arrange because many banks and building societies are cautious about properties with future payment obligations attached to the title. An overage clause may require the buyer or a future owner to make an additional payment if planning permission is granted, land is developed, or the property rises in value after a trigger event. Mortgage lenders will usually want their solicitors, valuers and property risk teams to review the wording before agreeing to lend. The most important issues are how long the clause lasts, how the payment is calculated, whether it affects resale, and whether it weakens the lender’s security. Trinity Financial’s brokers can approach lenders who are prepared to consider overage clauses and help borrowers present their case correctly. Some of the best lenders for overage mortgages include: Beverley Building Society, Halifax, Harpenden Building Society, Stafford Building Society, Swansea Building Society and Together.

Some mortgage lenders are more open to considering properties, typically country houses, with overage clauses than others, but most will need to review the exact wording before confirming whether the property is acceptable based on their set acceptance criteria.

Overage clauses are often used when a seller believes a property or piece of land could rise in value after completion, usually because of future planning permission, development, subdivision or change of use. The clause gives the original seller the right to receive an additional payment if a specific trigger event occurs. LandListings explains that overage payments are often linked to a percentage of the uplift in value, commonly somewhere between 25% and 50%, which can significantly affect the buyer’s future profit or resale position.

This is one of the reasons mortgage lenders can be cautious about properties with overage clauses. The lender’s solicitor and property risk team will want to understand how the clause is registered, what triggers the payment, how long the obligation lasts, whether it binds future owners and whether it could affect the lender’s security. Clauses linked to planning permission, development potential, infrastructure improvements or plot sales can be particularly sensitive because they may create future financial liabilities or make the property harder to sell. Borrowers should ask their solicitor and broker to review the overage wording before committing to the purchase or even applying for a mortgage.

Lender position	Examples from lender research on overage clauses	Typical policy points
Yes	Beverley Building Society, Halifax, Harpenden Building Society, Stafford Building Society, Swansea Building Society, Together	These lenders may consider overage clauses, although property acceptability will usually depend on the valuation, legal review and the specific wording of the clause.
Yes with additional conditions	ESBS, Ecology Building Society, Family Building Society, Marsden Building Society, Nationwide	Conditions can include sight of the overage wording, maximum LTV restrictions, solicitor approval, valuer comments and confirmation the lender’s security is not adversely affected.
Refer to lender	Afin Bank, Bath Building Society, Buckinghamshire Building Society, Coventry for Intermediaries, Furness Building Society, Legal & General Home Finance, Melton Building Society, Offa, Penrith Building Society	These lenders ask brokers to refer details before submitting a full application. Decisions are usually made case by case.
Unlikely to be acceptable	Accord, Aldermore, Atom Bank, Bank of Ireland, Barclays, Clydesdale, Co-operative Bank, HSBC, Kensington, Metro Bank, NatWest, Precise, Principality, Skipton, TSB, Virgin Money, West One Loans and others	Many lenders will not lend where there is an existing overage clause or where one will be created on completion.
Private banks	Coutts, Lloyds, Barclays, Investec and Arbuthnot Latham. Typically for £1.5 million+ mortgages.	These lenders may consider overage clauses, although property acceptability will usually depend on the valuation, legal review and the specific wording of the clause.

Source: Knowledge Bank. Please note that this information is subject to change.

What conditions do overage clause mortgage lenders apply?

Lenders that are willing to consider overage clause mortgages often apply strict conditions.

For example, some building societies will only consider an application if they can review the wording and are satisfied the overage clause does not affect their security. One lender may consider an overage clause up to 90% loan-to-value if the wording is acceptable, while another limits lending to 50% loan-to-value and reviews cases individually.

Another lender states that properties with an overage clause can be acceptable below 60% loan-to-value, where the property has been valued on a normal residential basis and no account has been taken of potential development land value.

These policy differences show why matching the case to the right lender matters. A borrower with a 10% deposit may have very different options from someone with a 40% or 50% deposit.

Do solicitors have to report overage clauses to the lender?

Yes. Even if a mortgage offer has been issued, solicitors must report title issues and restrictions to the mortgage lender. An overage clause can affect the lender’s security, so the lender will usually want to review the wording before completion.

Borrowers sometimes assume that if a mortgage offer has been issued, the lender has accepted the overage clause. This is not always the case. The issue may only come to light once the solicitor reviews the title documentation. This is why it is worth speaking to the estate agent if you are buying a rural property, and checking the estate agent's property write-up.

Aaron Strutt, product director at Trinity Financial, says: “We have seen cases where a borrower only mentioned the overage clause after the application had been submitted. That can delay the mortgage or mean the case has to be moved to a different lender. It is much better to tell your broker and solicitor as early as possible so the right lender can be approached from the start.”

Can an overage clause be removed before completion?

Sometimes, yes. Some lenders will only proceed if the overage clause is settled and removed before they release mortgage funds. Whether this is possible depends on the seller, the beneficiary of the overage clause and the legal wording.

If the clause cannot be removed, the lender will need to decide whether the wording is acceptable. The buyer’s solicitor will usually need to provide the lender with a copy of the clause and explain how it affects the property.

What types of property commonly have overage clauses?

Overage clauses are often found on properties with development potential. Examples include:

Houses with large gardens
Properties with land
Rural and semi-rural homes
Former farm buildings or converted agricultural property
Properties where the seller wants a share of future planning gain
Homes with possible future building plots
Properties affected by agricultural or occupancy restrictions
Land sold with hope value for development

These properties can still be attractive to buyers, but the mortgage application often needs more preparation. Just because there is an overage clause, it does not mean the buyer will develop the land.

What should buyers do before applying for an overage clause mortgage?

Before applying, buyers should try to obtain the overage wording from the estate agent or the seller’s solicitor. They should also tell their mortgage broker and solicitor about the clause at the earliest opportunity.

A good broker can then speak to suitable lenders before a full application is submitted. This can reduce the risk of wasted valuation fees, delays or a late-stage mortgage decline.

Useful steps include:

Ask for the full overage clause or title wording.
Confirm what triggers the overage payment.
Check how long the overage clause lasts.
Find out whether it affects the whole property or only part of the land.
Ask whether the clause can be removed before completion.
Speak to a mortgage broker, like Trinity Financial, before submitting a mortgage application.
Make sure the lender’s valuer is aware of the clause.
Allow extra time for underwriting and legal review.

Can you remortgage a property with an overage clause?

Remortgaging can also be more difficult if a property has an overage clause, especially if a new cause has just been added -but if you managed to get a mortgage on an overage clause property before, it may well be possible to get another one on it

. Some lenders will not accept the property as security, even if the borrower has owned it for years and the mortgage has always been paid on time.

If you are remortgaging, the new lender’s solicitor may still need to report the clause. Product transfers with your existing lender may be simpler because there is usually no new legal work, but options depend on your lender and whether you are borrowing more money.

Does a bigger deposit help?

A bigger deposit can help because some lenders that consider overage clauses impose lower loan-to-value limits. The lender may want a larger equity buffer if there is any concern about future saleability.

For buyers with smaller deposits, lender choice may be much narrower. This does not mean the mortgage is impossible, but the case needs to be checked carefully before an application is submitted.

Why use Trinity Financial for an overage clause mortgage?

Trinity Financial works with more than 90 lenders, including high street banks, building societies, specialist lenders and private banks. Our brokers regularly deal with complex property types, including properties with land, title restrictions, agricultural clauses, annexes, unusual buildings and overage agreements.

We can approach lenders before submitting a full application, check whether the overage wording is likely to be acceptable and help reduce the risk of the case being declined late in the process.

Speak to a Trinity Financial adviser today

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The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

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Can you get a mortgage on a property with an overage clause?

Yes, it can be possible to get a mortgage on a property with an overage clause, but not all lenders will accept them. The lender will usually want its solicitor, valuer and property risk team to review the wording before deciding whether the property is suitable security. The key issues are what triggers the overage payment, how long the clause lasts, how the payment is calculated and whether it could affect the property’s future saleability.

Which lenders accept overage clause mortgages?

There is no simple list of lenders that will automatically accept every overage clause, as applications are evaluated on a case-by-case basis. Some high street banks, building societies and specialist lenders may consider them, but it depends on the exact wording and the property. A lender may be more comfortable if the clause is limited, clearly drafted and unlikely to affect resale. Mortgage brokers, like Trinity Financial, often need to speak to lenders before submitting an application. Some lenders open to overage-clause mortgages include Beverley Building Society, Halifax, Harpenden Building Society, Stafford Building Society, Swansea Building Society, and Together. Private banks, including Coutts, Investec and Arbuthnot Latham, are also likely to accept some overage clauses on high-value rural homes.

What types of mortgage rates are offered on overage clause mortgages?

Borrowers buying a property with an overage clause may still be able to access standard mortgage rates, including two-year fixed rates, five-year fixed rates, tracker mortgages and variable-rate deals, depending on the lender’s criteria. The overage clause itself does not always mean the borrower must pay a specialist or higher rate, but lender choice may be more limited if the clause is complex or affects the property’s value. I have never seen a specific overage clause mortgage rate offered by a bank or building society.

Why are lenders cautious about overage clauses?

Buyers should ask their solicitor to review the overage clause before exchange of contracts and send the wording to their mortgage broker as early as possible. The broker, like Trinity Financial, can then approach suitable lenders and check whether the property is likely to be accepted. It can also help to understand the trigger events, the percentage payable, the length of the clause and whether the obligation applies to future owners.