Buying
a property in need of renovation and doing it up is increasingly
popular - whether it's for investment or to create your dream
home.
The problem is that most mortgage lenders require a property
to be 'habitable' before they will secure
a mortgage on them.
What's
Habitable?
Habitable
means that a property is fit to live in. This is defined as:
Watertight - roof in good repair
Running water & mains electricity
Basic kitchen and functional indoor bathroom (outdoor toilets
don't count!)
The
'habitable' requirement leaves many buyers in a catch-22 situation
- they can't renovate without a mortgage, and they can't get
a mortgage before the renovation is complete.
Renovation
Mortgages
Fortunately,
some lenders do offer mortgages designed specifically for people
who are renovating.
These renovation mortgages are similar to self-build mortgages
and work by releasing your mortgage funds in stages. Typical payment
stages are:
1. Initial purchase (just enough to allow you to buy the property)
2. Property structurally sound and watertight
3. All services and amenities in place - e.g. plumbing, wiring,
heating, bathrooms
4. Property decorated and finished
When
each stage is complete, your property will be inspected by your
mortgage lender's valuer, who will approve the payment for that
stage. Stage payments are normally made in arrears - although
there are a few lenders who will pay them up front.
Renovation mortgages normally require a deposit, although this
can be as small as 5% - 10% of the initial purchase price.
Remortgaging
for Renovations and Home Improvements
When
you already own a property and want to have an extension or
other improvement remortgaging to raise the required capital
/ money is a common way to fund this.
The
first step is to have a word with your current mortgage lender.
See
what they are prepared to offer you. Then compare this with
what you could get by remortgaging with a new lender.
What
you are looking for is the interest
rate on the new mortgage, plus any fees
involved in cancelling your old mortgage and / or arranging
the new one.
Ideally you should be going for a limited term mortgage eg 2
or 3 years - paying a fixed
rate of interest. That way it should be easy to see what
the total monthly cost of the payments will come to.
Read
enough? Just want a quote? To get
your best mortgage quote quickly and easily
we can put you in contact with a recommended mortgage adviser.
It's free, completely confidential and there's no obligation
at all. Simply fill out the form below
