Things to consider when buying a renovation property

🕑 6 minute read

Getting a mortgage on a renovation property

Whether you’re a first-time buyer or an experienced investor well up the property ladder, buying a “fixer-upper” may be a tempting prospect.

However, it’s worth considering that a house renovation mortgage isn’t the same as an ordinary mortgage, and there are other factors to consider before you sign up for one. There’s a lot of pros and cons to renovation, from cost to workload, to the potential gains.

You may pay less for a house renovation mortgage, but you need to think it through carefully when the risks are potentially higher and could result in extra costs.

Here, we’ll look at what you need to do to get a renovation mortgage, how they compare to a standard mortgage, and the potential problems that can happen when “flipping a home”.

How to get a mortgage on a "fixer upper"

House renovation mortgages are different to a normal mortgage. The main difference is that you’ll borrow both the money for the property and the cash to perform the renovations.

How easy it is to find a mortgage will be largely dependent on the condition of the property you may want to renovate. There are some checks you might want to perform on the building before you decide to get to work. 

The majority of high-street banks and mortgage lenders won't offer mortgages if:

  • The property is derelict, due to neglect, for example
  • The building is uninhabitable, such as having no functioning bathroom or kitchen
  • A conversion is needed

Be prepared for lenders to run more checks than with a standard mortgage – they want to feel assured the work required isn’t risky for them.

Extra considerations with a renovation mortgage

If the building is habitable but needs work, a lender may not lend the full amount. They may withhold some funds, known as retention, until essential repairs are completed. The property may need to be re-assessed before the remainder of the funds are released.

There are a lot of potential risks and complications with a renovation mortgage, not to mention the costs involved. It pays to have a contingency in place. As a renovation project can throw up many unforeseen challenges, the more money you have on standby, the better.

What else to consider when buying a renovation property

Unexpected costs

From the outset, it’s important to set yourself a realistic budget. People often end up spending twice as much as they bargained for. We suggest you tack on at least an extra 20% for those unforeseen issues that will inevitably spring up.

Although a property that needs doing up will be cheaper to buy initially, consider whether you have enough funds to cover major improvements. You may just want to put in a new kitchen and bathroom, but once you start ripping out the old fixtures and fittings you can find anything from rotten floor joists to damaged brickwork.

Planning permission

Check how easy it will be to get planning permission for the house. If you want to make extensive changes or you’re thinking of buying a listed building, you’ll need consent from your local authority. Once your application has been submitted, it could take up to 12 weeks for the council to make a decision. This allows for neighbours to have their say.

These days, most smaller renovation projects don’t need planning approval, so there are plenty of properties you can do up under permitted development if you want to get cracking straight away. You can find out more on the Government’s planning portal website.

Project management

You can either manage your own project or employ a project manager. The benefit of hiring someone is that they will liaise with builders to ensure the work is carried out to a specification, and their experience avoids unnecessary costs and saves you from having to be on site all the time. But the downside is that you will have to pay for their expertise.

If you’d rather manage the project yourself, make sure you get quotes in advance so you can calculate your expenditure. And be prepared to live on a building site.

Your own skills

Think carefully about how much of the work you could take on yourselves. You may be an enthusiastic DIY-er, but could you plumb in a loo, fit a kitchen or tile a bathroom? If the honest answer’s no, you’re much better accepting this at the beginning and getting the professionals in from day 1 rather than having a bash yourself.

Even if your practical skills are negligible, there are some things you can do to keep costs down, from stripping wallpaper to tidying up.

Hidden issues with older houses

With an older property, you should be prepared for more unexpected costs, which all add to your expenses.

Make sure the property you buy is worth having the money spent on it. It could be so run down that it will cost a lot more than expected to repair. Using the wrong renovation techniques in old buildings can cause extensive damage, while subsidence issues could make it harder for you to get buildings insurance.

Electrics in old buildings will often require updating. Have you considered that the cost of rewiring a typical three-bedroom house could run into several thousands of pounds?

Timeframe

Renovating a property can be a lengthy – and stressful – process. Before you know it, 5 years have elapsed and you’re still living on a building site. Try and work out a realistic timeframe before you commit, seeking advice from tradesmen and leaving yourself some wiggle room for any unexpected jobs. Build in a week off or two as well, renovation can be stressful and you’ll deserve the odd break.

Remember to also factor in other demands on your time. If you have a busy job or small children (or both!) and plan to do much of the work yourself, you’ll probably need a more generous timeline.

Calculators and tools

We have a range of mortgage calculators to help you:

  • Find out how much you could borrow from Halifax
  • See how much you could save if you make overpayments on your mortgage
  • Get an idea how a change to the Bank of England Base Rate could affect your monthly payments
Use our calculators and tools

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