Renovation Mortgages

I’ve got an opportunity to buy a fixer-upper. Not habitable, potentially not mortgageable, buyer won’t entertain a chain, would prefer a outright cash buyer (unicorn in the circumstances). I can raise enough equity from my current property to cover a mortgage deposit, stamp and minimum viable renovations.  Sticking point is convincing the seller that I’ll be able to get a mortgage on it.

Anyone used a renovation mortgage? Bridge loan is very expensive.

Will there be a second home tax to consider as well?

Might add a fair bit if so

Can you just get a loan? However..

Are you sure its unmorgatable?

I bought a repossession about 15 years ago, the previous owners had completely stripped everything out before leaving. From memory the only thing that was required to be able to get a mortgage on it was it had to have a usable kitchen sink.

You can sleep and eat in the toilet, its perfectly acceptable. Don’t believe what they said at school

Will there be a second home taxed to consider as well?

Yes there will I’d imagine.

OP I hope you’ve done your sums properly…. Take what you reckon it’s going to cost and multiply by around 2.5 to get the inevitable final renovation costs!

Take what you reckon it’s going to cost and multiply by around 2.5 to get the inevitable final renovation costs!

Go and check out the grand designs thread and don’t invite Kevin round unless you want an unexpected pregnancy mid development

What makes you think it’s not mortgageable? Is it non-standard construction or just a ruin?

A higher bid got it a couple of months ago, but then failed to get a mortgage. It’s been broken into and missing some pipework, water not on, no cooker. No opportunity to fix a few bits as seller is a bit odd, if he did fix it he’d open up a significantly bigger market as it’s pretty unique for the village and would be desirable. However, it’s too expensive for developers to knock down and build 4 or 5 houses profitably.

Renovations are not planned to be on a grand designs scale, some general deforestation, move the kitchen to the back, 2 sets of bifold, heating and electric, 2 bathrooms and redecorate.

I’ve done my sums, new second home rate impacts cashflow and forces sale of first home within 3 years. I’ve put my max bid in, with contingency. Bridging loan not cost effective.

I really need to be able to convince the seller I can get a mortgage, broker seems happy, but looking for people’s experience with renovation mortgages specifically.

Also consider that you pay VAT on renovations, not on new builds unless it is classed as derelict. There’s a UK self-build forum with a specific board on finance that might have some helpful info.

Also consider that you pay VAT on renovations, not on new builds unless it is classed as derelict

I believe it’s something like empty for 2 years to get the lower 5% Vat

You sound like you know what you’re doing, but I personally wouldn’t touch a renovation project right now unless I was doing most of the work myself and/or had a network of very trusted trades who you know will work for a sensible price.

Vat is 5% if its been empty for 2 years, you have to prove it, and work with a builder who will administer it.

Ah thanks, I knew about zero vat on new builds but not the reduced on reburbs – it’s been vacant 4 years.

I’ve run several commercial projects at work, and built a large extension here a few years ago so although it’s a big task and a big financial commitment I should be able to get there in the end.  Had the snip so shouldn’t be any grand designs style oopsies halfway through ?

Ecology Building Society. Renovation Mortgages

Ecology Building Society.

Do you have any direct experience?

Have you considered demolishing the property and erecting a pre fabricated home?

Why are you doing it – to just make money or to actually live in it (and sell/rent your current house)?

If the former, are there less ‘risky’ ways to make the same return?

Hi

More than happy to have a chat with you, I’m a mortgage broker for 30+ years and we deal with many client from first time buyers to those looking to build their own property using self build mortgages, development finance and investment properties etc.

Feel free to drop me a line and can talk you through options etc if you wish.  Stuart@sjfinancialsolutions.co.uk.  Based in Birmingham but cover the UK and have helped a few through the ST forum.

Stuart

Thanks Stuart, sent you an email.

Why are you doing it – to just make money or to actually live in it (and sell/rent your current house)?

Complicated. The ex lives in a nearby village and there is a lack of properties that are bigger than my current house. I need more space (4 kids) and it would be good for them if we were in the same village. This would deliver a great house at a slightly cheaper total price, but the seller will not entertain a chain buyer, so I need to finance unconventionally. One option would be to sell existing and rent but timelines wouldn’t work.

Don’t overlook also that if the property is unhabitable then you don’t necessarily have to pay the full SDLT on the purchase.

Ecology Building Society.

Do you have any direct experience?

We used them for a self build mortgage. It took a long time to sort the offer, I think mainly due to them taking a long time to ask all the necessary questions (more information required than a normal house I think, to know they can safely invest in the build) from our solicitor, and not being great at engaging with the answers (and our broker being shite).  But once that was sorted they were pretty good as an actual customer experience. And we got a discount through their c-change scheme.