Mortgage For Renovation Project
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Mortgage for renovation project
Buying a home to renovate can have many advantages such as; turning a rundown building into a unique home bespoke to your desires or converting a building intended for other uses into a home.
However, getting a mortgage for renovation projects can be slightly less straightforward than you may be used to with a traditional mortgage.
This is because many of the larger mainstream lenders have a fairly rigid lending criteria designed to ensure that the property would be relatively easy to sell on should the borrower fail to keep up with their repayments and they are forced to repossess it.
Getting a mortgage for a renovation project
Although they may be more difficult to come by there is a fair amount of variety within the mortgage for renovation market. Which mortgages are available for a property will depend on if lender’s would currently consider it ‘habitable’ or not - this term generally means that the building is watertight, with running water and mains electricity and it has at least a basic kitchen and inside bathroom.
However with this type of mortgage some lenders may only be willing to lend you the current value of the property and they will not be willing to lend you anymore until the project is completed at which point you could have another valuation carried out. This option will only be suitable if you have access to sufficient cash to pay upfront for the actual renovation then.
If the property fails to meet the ‘habitable’ criteria or you want to borrow more money on the mortgage to carry out the actual renovation then some lenders do offer specific mortgages for this kind of situation. Renovation mortgages are similar in practice to self-build mortgages as with both the funds are paid to you in stages over the project’s course.
The payment stages can vary between plans but typically they include:
- Purchase– this will usually just provide you with enough money for the initial purchase of the property.
- Structurally sound and watertight – when the property’s structure has been deemed sound and is sealed against the elements.
- Service and amenities – once all of the wiring, plumbing, heating etc has been fitted.
- Final – when the property has been decorated and all work completed.
At the end of each stage a valuation will be carried out by the lender’s approved valuer. Most renovation mortgages are usually paid in arrears which means you will be paid after you have completed each stage although a few lenders may be able to offer advance payments.
If you already own a different property it may also be possible to apply for a mortgage or remortgage it to fund the purchase and renovation of the second property. But remember this will prolong how long it takes you pay off your first mortgage and put it at increased risk of repossession if you fail to maintain your repayments
Borrowers considering using a mortgage to take on a renovation project may benefit from using the services of an independent mortgage adviser. An adviser who offers a whole of market service can offer their client’s impartial advice and use their knowledge to search across a range of different providers to try and find the right products for their needs.
To find out if Fair Mortgages could help you fill in the online contact form on this page, to request a call back. Alternatively you can call directly on: 0117 403 4474