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🕑 6 minute read
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”.
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:
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.