What Should Coastal Homebuyers Know About Flood Risk and Mortgages?

If you’ve got your eyes set on purchasing a coastal home, then you’re probably wondering how flood risk could impact your ability to get a mortgage.

While coastal properties can offer stunning views, clean salt air, and peaceful surroundings, they can also come with their own unique challenges. From rising sea levels and erosion to more frequent storms, living by the coast can often affect your mortgage eligibility and flood exposure.

So, how does living near water affect your mortgage, insurance, and future resale value?

In this article, we explore all the details about flood risks and mortgages for coastal home owners. From understanding flood zones and flood exposures to securing the right insurance and protecting your investment. Let’s begin.

What Are Flood Risk Zones, and How Do They Affect Coastal Homes?

When buying a coastal property – it is vitally important to understand the potential risk of flooding and erosion. In the UK, there are three main types of flood zones, categorised as: flood zones 1, 2, and 3.

Each zone is allocated to a specific area based on the annual probability and occurrence of flooding. Knowing which zone your property resides in will ultimately play a major role in your mortgage application, insurance cover, and overall property value.

Flood Zones Explained

Lenders and planners will use these zones during flood risk assessment and flood risk for planning decisions.

Importantly, should you be looking to purchase a coastal property that resides in either flood zone 2 or flood zone 3, mortgage lenders will often require additional due diligence and may even decline the application altogether.

Check Flood Maps and Base Flood Elevation

Careful research is often key when planning a coastal property purchase. One of the first steps that can help you review the potential flood risk of the area your coastal property is in is to use the Environment Agency’s tool: ‘check the long term flood risk for an area in England’’.

This free flood risk mapping tool allows you to enter a postcode and assess both surface water and river/sea flood risk.

Some surveyors will also calculate the Base Flood Elevation, which indicates how high flood waters might rise in your area.

This can help determine whether flood defences or modifications are needed – and can support future planning permission or insurance applications for coastal housing repairs.

Do I Need Flood Insurance for a Coastal Property?

When purchasing a property near the coast or in any flood-risk area – that is to say in a medium or high-risk area – flood cover insurance will typically be required by most mortgage lenders.

However, even if flood cover is not a mandatory requirement from your chosen lender, it should be a vital consideration and can provide essential protection for your investment.

What Does Flood Insurance Cover?

Flood insurance cover usually comes as standard within your home insurance, however, the exact specifics of coverage can vary depending on your chosen insurance provider.

In the context of flooding, generally what will be included within a house insurance policy will be:

• Structural damage cover: Covering essential structural elements like walls, flooring, electrics, and foundations
• Removal of debris: Covers the cost of clearing flood-damaged materials and debris from the property
• Temporary accommodation: Covers the cost of rehousing if your home becomes uninhabitable due to flood damage
• Contents of the property: Covers the financial cost of your belonging, including furniture, appliances, and personal items damaged by floodwater.

Keep in mind that flood insurance payouts are subject to an excess, which will also vary between providers.

It is also worth keeping in mind that insurance policy can change for properties that fall into either flood zone 2 or flood zone 3. For example, many insurers may exclude flood cover insurance – or apply stricter terms – due to the perceived increased risk flooding.

In these cases, you may need to purchase standalone flood cover insurance or seek a specialist provider. At Boon Brokers, while we don’t specifically offer insurance for flood risk properties, we can still help arrange your housing insurance cover – even if your property is located in a high-risk area.

Because flood insurance coverage can vary greatly between providers, it’s always best advice to:

• Check exclusions and limitations carefully
• Compare multiple quotes, especially for high-risk areas
• Speak with a qualified broker or insurance adviser to explore specialist options

Building Insurance and the Role of Flood Re

Securing building insurance for flood risk areas can be both complex and costly – especially for properties located in either flood zone 2 or flood zone 3.

To help make flood insurance more accessible, the UK government has introduced the Flood Re scheme. This is a not-for-profit initiative that has been established with the aim to keep premiums affordable for homeowners who are living in high-risk areas.

Through this scheme, insurers can pass the flood-related portion of a policy to Flood Re, helping to reduce costs for eligible customers.

However, the scheme is only available to certain types of properties. As such, in order to qualify, your property must:

• Be located in the UK
• Have been built before 1 January 2009
• Be used as the homeowner’s primary residence
• Be listed in the homeowner’s name and fall within Council Tax bands A – H

As a result, buy-to-let properties and coastal holiday lets are typically not eligible for Flood Re support. Crucially, while Flood Re can help make a big difference to the overall affordability, not all insurers participate, and coverage is assessed case by case.

Working with a trusted whole-of-market mortgage broker – like Boon Brokers – can help you match the perfect mortgage with the right level of cover for your property.

Can Flood Risk Impact My Mortgage Approval or Rates?

The short answer is yes. Applying for a mortgage, whereby the targeted property purchase is in a high flood risk area, can significantly affect:

• Whether your application will be approved for a mortgage
• How much a lender will allow you to borrow
• The interest rate you’ll be able to secure

The reason for this is down to risk assessment. Each lender will complete their own risk assessment on the terms and condition of your application to determine how likely they are to recover the loan.

Naturally, lenders prefer low-risk properties and financially stable borrowers, as this increases the likelihood of full repayment. Additionally, in the case of defaults or falling property value, the lender relies on the home’s resale potential to recover their losses.

How Lenders Assess Risk

In addition to the borrower’s individual financial and credit risk assessment, mortgage lenders will complete their own property valuation that includes reviewing a home’s flood exposure, previous flood claims, and whether appropriate flood insurance coverage is in place.

Ultimately, if the risk is deemed too high, lenders may:

• Decline the mortgage altogether
• Reduce the loan amount
• Increase your available interest rate

Property Valuations and Appraisals

Lenders rely on surveyors to assess a property’s value. If erosion or high flood risk threatens its long-term safety or insurability, the property can be ‘down-valued’ – essentially lowering how much you are able to borrow.

Additionally, surveyors can flag structural concerns or recommend further reports before the lender makes their final decision.

Escrow Accounts and Insurance Premiums

In some cases, lenders may require you to pay flood insurance premiums into an escrow or impound account in order to guarantee continuous coverage. This arrangement is to protect both the borrower and lender interests.

A common question at this juncture is: how long do I pay the escrow on my mortgage?

Unfortunately there is no exact amount of time and the answer will depend on your chosen lender. Some may request an agreement that it is in place for the entire life of the loan, while others only for high-risk periods.

Will Flood Risk Affect My Coastal Home’s Resale Value?

Yes – owning a property (commonly coastal properties) that resides in a high flood risk area can greatly affect the resale value of your home.

Resale Challenges

The reason why high flood risk zones can often make properties harder to sell is that they simply include additional risks and concerns for future buyers, such as:

• Rising insurance premiums
• Limited mortgage options
• Future resale potential

As such, homes with past flood damage or restricted access to affordable flood insurance policies will often experience longer selling times and reduced market values.

Long-Term Value Considerations

If you’re currently searching for a coastal property or are interested in a property that is within a high flood risk area, it’s important to consider the long-term property value.

Over time, sea level rise and extreme weather could make certain coastal locations increasingly vulnerable. This may reduce long-term value or insurability, particularly if major repairs are needed or coastal housing repairs become too costly through insurance due to regulatory changes.

For example:

• Let’s say that you buy a coastal property for £300,000 with a 25-year mortgage.
• Over time, repeated flooding or rising insurance costs cause the property value to drop to £220,000.
• You’re still repaying the original loan, which is now higher than the home’s market value.

This situation is called negative equity, and it can make it difficult to remortgage, sell, or move without taking a financial hit.

What Should I Ask or Look for Before Buying a Coastal Home?

If you’re considering the coastal house of your dreams, asking the right questions is the best place to start.

Here is are the 3 key questions and steps that you need to consider:

1. Ask for Past Flood Claims

When you’ve found your dream coastal property, make sure that you request written disclosure of any previous flood events or insurance claims.

Importantly, sellers must legally disclose this on the TA6 form, but it’s worth asking for supporting documentation too.

2. Hire a Surveyor

Hire a qualified surveyor to perform a detailed flood risk survey, inspect drainage and damp proofing, and assess flood resilience measures. In some cases, they may also be able to provide you with an Elevation Certificate, which can often help lower your insurance premiums.

3. Check Local Regulations

Particularly important if you’re planning on any future renovations or coastal housing repairs – consult the local authority about regulations.

Coastal planning regulations can be strict, particularly in protected areas or high flood risk zones. You may need special permissions for any major works or flood defences.

Can a Mortgage Broker Help Me Check the Flood Zone for a Specific Property?

At Boon Brokers, as part of your mortgage journey, we can check whether a property falls within a high flood risk area and guide you through each lender’s criteria to ensure all requirements are met.

Here’s how we help:

• Use Environment Agency tools and third-party data to confirm flood risk and flood zone type
• Connect you with lenders who are open to financing properties in flood zone 2 and flood zone 3
• Ensure your building insurance for flood risk areas meets mortgage requirements

Whether you’re early in the search for your dream coastal property, or are thinking about different home insurance policies, our dedicated team is here to help you.

Contact Boon Brokers today for expert, fee-free mortgage advice on coastal homes and start your mortgage journey with confidence.