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Spray foam and mortgages

Journalist: Lana Clements, The Sun

ended 03. December 2022

Nationwide has been talking about the risks around using ‘cowboy’ spray foam firms and warned that it could affect getting a mortgage. Just wondering if any brokers have had any experience of this? Or if you have any comments or thought related to this, please feel free to share. This is a story for Mortgage Solutions.

9 responses from the Newspage community

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Dan Osman
Head of Later Life Lending (Age 55+) at UK Moneyman
For older clients looking to explore equity release, the spray foam loft insulation they installed to make their homes more energy efficient is likely to result in an immediate decline. There are currently no lifetime mortgage lenders who will consider a property with spray foam insulation in the loft, which means that clients are either unable to raise any money or have to commit a significant amount from their savings to have the insulation professionally removed. We are currently referring at least one client a month for specialist legal advice to recover some of these costs but there is a clear need for an unambiguous campaign to educate homeowners about this issue.
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Michael Webb
Managing Director at Mortgage Republic
We have had two instances where spray foam has been an issue this year. In both cases, there was not an adequate survey pre-installation or guarantees / warranties in place to satisfy the surveyor. In both instances, The Mortgage Works (Nationwide BS) were the lender. Both cases fell through as the clients were unwilling to proceed with the property with another lender due to potential resale issues in the future. Both successfully went on to purchase properties elsewhere- we are unaware whether the original properties ever completed with a buyer. Nationwide seem to be the lender with the biggest issue with the spray foam insulation, but with social media flooded with video adverts of the products, it is important owners are aware of the potential consequences of installing it in their properties. It is something that estate agents should be questioning their vendors on, and advertising upfront I believe.
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Hannah Bashford
Director at Model Financial Solutions
We had a first time buyer looking at a property that had used spray foam insulation in the loft. This was picked up on the survey and the client was told it would need to be removed before the property was suitable for security, needless to say the client did not go ahead. We’ve also had a client looking to buy a property that had cavity wall insulation that was put in during the 80s. The survey suggested that the insulation had been affected by damp and was potentially degrading the fabric of the building therefore it would need to be removed before the property was suitable for security. it’s wise to check and double check the credentials of any insulation you are using on your property to make sure it is appropriate for the type of building and will not cause problems with a survey or lender.
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Marcus Wright
Managing Director at Bolton Business Finance
I have had buy-to-let mortgages declined by lenders just due to the presence of spray foam insulation in a loft. However, the policy seems to be applied very inconsistently. Ultimately it will just depend on if a valuer checks the loft and has the misconception that any presence of spray foam insultation is bad for the property. Still seems ridiculous that an easily rectified issue of potential dry rot would make a property un-mortgageable. However it's something to look out for when buying a property.
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Imran Hussain
Director at Harmony Financial Services
Spray foam insulation is a resounding "no" for quite a lot of lenders and when you have one of the largest lenders in the country warning about it, it should be taken seriously. I have never known a valuation come back on a property with spray foam insulation and for a lender to be happy to proceed with lending on that property.
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Tahina Akther
Barrister and Co-Founder at Wildcat Law
When it comes to cowboy builders, many customers are left without compensation because they often hold no insurance and simply declare their business insolvent if there is an issue. It is really important when having any work done to your house, especially insulation, that you check to ensure the contractors hold relevant qualifications, are members of appropriate trade bodies and, most importantly, have indemnity insurance that not only covers the work they will be doing, but also a sufficient monetary amount. If a builder does not have insurance then you risk not only having paid for sub standard work, but also for the cost of correction.
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Oliver Cotterell
Director at Windsor Hill Mortgages and Cotterell & Cotterell Commercial Finance
Unfortunately yes, we have had cases when clients both trying to purchase and refinance have had significant issues. We have seen lenders react in many ways. Some will request the foam to be professionally removed, and a new timber survey completed afterwards to assess whether the foam has caused rot or damage to the timbers, while other lenders will just outright refuse it. It can also reduce the value of the property to the point that people end up in negative equity.
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Kasia Makarewicz
Senior Mortgage Adviser at Step by Step
Spray foam can cause a lot of problems, and it can most certainly affect you getting a mortgage. Lenders rarely give any definitive guidance on their policy toward spray foam insulation and rely on valuer comments. I had a case with Barclays who declined the application as the property was not deemed suitable for lending purposes. It cost around £2000 for the foam to be removed.
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Gary Boakes
Director at Verve Financial
A £20,000 retention was placed on a property due to spray foam with santander. The surveyor was unable to confirm whether the roof was suitable for lending purposes, so the retention was to cover a replacement of the roof. A separate roof report had deemed the roof in a good condition, but was not enough for the surveyor to remove the retention, back and forth, new lender and in the end, the result was the seller removed all the spray foam for the sale to proceed. I would recommend with any house owner to discuss with their current lender their criteria and what standard they would expect it to be finished before proceeding with any spray foam as from our experience it has only caused major issues and costs for the seller and buyers.