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Mortgage Advisor & Director
What is a renovation mortgage?
A renovation mortgage, otherwise known as a refurbishment mortgage, allows you the finance to buy the property as well as perform renovation works.
Typically offered by specialist lenders, renovation mortgages provide an alternative to a bridging loan which may be more applicable depending on your circumstances.
Our experienced advisors at Teito have helped many customers to secure renovation mortgages, getting the best deal possible to bring your new home up to standard. As we are a whole-of-market broker, we have access to niche mortgage deals that are not available to the general public.
Complete our online form to get started or carry on reading to learn more.
What are the benefits of a renovation mortgage?
A renovation mortgage can be 'light' or 'heavy' depending on the extent of the improvement works and is typically released in two phases.
Securing a renovation mortgage can provide a capable vehicle allowing property investors to upgrade a property for sale. The loan amount is based on the forecast value of the property once improvement works have been completed.
How does a renovation mortgage work?
Considering the example below, the initial phased payment of £100,000 is released initially to purchase and renovate the property, followed by a second payment of £50,000 following completion of the works. The mortgage is provided at 70% of the project value once the renovation is complete.
Property price: £150,000
Renovation cost: £30,000
Projected value: £250,000
Refurbishment mortgage: £105,000 - 70% of projected property value
Payment 1: £100,000
Payment 2: £50,000
What is the difference between light and heavy renovation finance?
Light renovation mortgages are used for properties that require minimal upgrade only, for example, the renovation that does not require planning permission. Examples of light renovation works include:
- Installing a new bathroom or kitchen
- Redecorating
- Fitting new windows
- Fitting a central heating system
- Rewiring
- Non-structural improvements
Heavy refurbishment mortgages are provided to facilitate more extensive works that are likely to require planning permission. Examples of heavy renovation works include
- Property extensions
- Loft conversions
- Structural works - internal and external
- Full conversions.
For development works that are more extensive than this, development finance is probably more suitable.
LTV and Rates for a renovation mortgage
The Loan to Value (LTV) ratio for a renovation mortgage is typically no higher than 75%.
You will find that rates are higher than for a standard residential mortgage at around 5% for a heavy refurbishment. There are shorter-term options available if you are looking to sell a property quickly at reduced rates.
There are many options available to facilitate renovation, and the overall rates and fees offered will depend on the property you are looking to renovate and your circumstances, get in touch for more information.
Contact a renovation mortgage expert
At Teito, our team of experienced advisors have access to specialist lenders who provide renovation mortgages.
We have helped many people secure the best rates possible on their new renovation mortgage. Complete our simple online form to get started.
FAQs
Yes but they can be more difficult to come by for first-time buyers due to there being fewer lenders available.
See our standalone guide to first-time buyer renovation mortgages for more information.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
