You may find yourself in a situation where you require a renovation mortgage. It could be you want to buy a run down property and take on the project of renovating it. Or you wish to carry out sizable repairs on your own property. Or perhaps make improvements to your own home to increase it’s value. There are many factors to consider before taking on a risky project of that scale and financing is likely the most important aspect to focus on. If you don’t already have the funds saved for the work, you may require a renovation mortgage.
You may have seen a property that needs work but has great potential or you wish to increase the value of your own property and need capital to carry out the work. You will need a type of mortgage that is specific for these purposes called renovation mortgages.
As with any type of mortgage loan, lenders will need to assess applications on an individual basis and take into account your affordability and whether you have the ability to make the monthly mortgage payments. They will also check your credit score or credit history to ensure you are a reliable borrower although there are some exceptions depending on the lender and their requirements.
Other factors to consider when sourcing a lender for a loan is if you already own the property, how much work and money is required, whether the property is habitable and how quickly you require financing. A habitable property is one that is considered to be liveable and has basic features such as a roof and walls and a working kitchen and bathroom. You may find it more difficult to borrow a high loan to valueThe ratio of the mortgage amount to the value of the propert... ratio if your property is inhabitable. There may be conditions which lenders will stipulate as part of their agreement to lend such as withholding funds until they are happy with aspects of work are completed.
Not all lenders are willing to offer loans for properties that require renovation so you might need to look at specialist lenders with experience with renovations and this type of loans. If can lend, they might not be able to loan the amount to cover the costs of the renovations which would mean you would need to have something in place to cover the cost of the building work along with other associated costs. Some lenders may cover the cost of the building work but only when the property is revalued and remortgaged after the renovation is complete. It is essential to find lenders and deals suited to your individual needs and situation.
Carrying out renovations, especially extensive changes is not a simple process and there are many elements to consider before committing yourself to such a task. It is best to prepare and contemplate carefully before applying to a lender for a renovation mortgage as they will also need to see a strong application to increase your chances of being accepted for a loan.
Other things to consider
Smaller projects may not require planning permissionPermission granted by the local authority for a property to ... but it is of huge importance when it comes to carrying out extensive work on a property. You’ll need consent from your local authority and this can take time for approval or issues may arise causing your application to be rejected. It is wise to check how easy it would be for your submission to accepted.
You may be able to find older properties for a cheap price but they may require more work to bring up to date so it is wise to make sure the renovation is worth doing. Renovating old buildings in using miscalculated techniques could cause further damage and create issues when it comes to getting buildings insurance.
It is important to figure not only your renovation mortgage financing but other costs associated with completing a renovation project such as surveys, design fees, building work costs and it is sensible to have cash set aside for unforeseen circumstances. Often building work can cost more than originally estimated and not having a cushion to fall back on mid-way through a project can end up with you being in a difficult position.
Finding a lender who would be willing to lend for renovations isn’t as easy some other types of property financing and not all high street lenders offer products for this type of loan. By using professional services such as ourselves will save you time and direct you to the lenders and deals most appropriate for your needs and circumstances. Get in touch today if you are looking for a renovation mortgage and we will be happy to help.
FAQs- Renovation Mortgage
Can we take out a bigger mortgage to cover the cost of renovation?
No, it is unlikely that you will be able to do this because lenders want to ensure that you repay the full value of the loan and the extra money you borrow will reduce the overall value of the house.
How To Get A Renovation Mortgage?
The first step is to apply for a home equityThe difference between the value of the property and the amo... loan from your bank or building society. This should be done by contacting them directly or via their website. Most high street banks won’t give you this mortgage but there are some lenders. The next step is to contact us to discuss the options available to you.
What is a renovation mortgage?
A renovation mortgage is a form of home improvement finance other than a purchase price that allows homeowners to use their existing home equity to fund improvements to their property. The amount borrowed is usually repaid over a period of years and the interest rate is typically lower than that charged for a standard mortgage.
Is the planning permission required for renovation mortgage?
It depends on the property type. The best way is to contact a mortgage broker like us before applying for the mortgage.
What kind of funding can you use for your renovation?
There are two main forms of funding: personal loans and mortgages. Personal loans are funded by individuals and are often used to pay off debts or buy furniture. Mortgages are funded by financial institutions and are generally used to buy new homes or to improve an existing one.
Is a Renovation Mortgage Necessary?
It is not necessary to get a Renovation Mortgage but it depends on your requirement from any street bank. For example, if you have enough equity for your current home then you can go for a bridging loan. A bridging loan is also a short-term financial product that could be used by an individual to own a high-value asset. It also works as advanced security while purchasing a home.
Is a Deposit Required for a Renovation Mortgage?
Yes, a deposit is required for a Renovation Mortgage. However, it doesn’t need to be a large sum of money. You may have already saved up a small amount for emergencies or another purpose. If so, you can put it towards your Renovation Mortgage. It is always better to contact a financial broker before going to a mortgage lender.
What is a secured loan?
A secured loan is where the borrower has collateral against which they can draw funds. In the case of a Renovation Mortgage, the borrower has a property worth more than the amount being lent. As long as the borrower keeps up with payments and maintains the property, the lender is protected. You can contact our team at needingadvice.co.uk and we can connect you with a specialist lender.
What Is An Unsecured Loan?
An unsecured loan is when the borrower does not provide any collateral. They must therefore make regular monthly payments until the loan is paid back.
How are mortgages for renovation different?
Mortgages for renovation are similar to those for purchase except that you will borrow less money. The difference in cost between a purchase and renovation mortgage is around £10,000.
Can we take out a bigger mortgage to cover the cost of renovation?
No, you cannot take out a larger mortgage to cover the cost. This would mean that you would have to repay more money than what is available.
Are there any tax benefits for renovating my home?
If you are self-employed, you can claim expenses related to renovations such as materials and labour costs. You can also deduct the value of fixtures and fittings.
Do I have to pay stamp duty on a Renovation Mortgage?
Stamp dutyA tax paid by the buyer when purchasing a property. is payable on all residential properties. It is usually charged at 1% of the purchase price. There are exceptions though, so check with HM Revenue & Customs about this.
Does a Renovation Mortgage require me to sell my house first?
You do not need to sell your house first. You can apply for a Renovation Mortgage while living in your current home.
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