Property renovations: what you need to know about finance and insurance
While some people have an amount of their own capital to invest in a major renovation, sometimes it is worth securing finance via a mortgage.
If the property you’re renovating is run-down but still considered habitable, you should be able to secure standard residential mortgage funding. Possibly you’re undertaking works such as roof repairs, rewiring, and central heating repairs or installing a damp-proof course.
In this case, most lenders will offer between 80% and 95% of the property’s current value, although they may place a retention on some of the monies, subject to the completion of what they consider essential repairs. The property may need to be re-inspected before the balance of funds is released and there will be an additional fee for this.
However, if the property is not currently habitable, you may need to apply for a renovation mortgage from a specialist lender – which will usually be one of those that offers self-build financing too. These renovation mortgages are for properties that are derelict, need to be converted or are not considered habitable because they don’t have a working kitchen or bathroom.
Generally speaking, you can get an advance of at least 66% of the property’s current value – and possibly up to 90% - then further funding becomes available as various stages of the renovation are completed. These stages will need to be verified by the lender’s valuer or certified by a surveyor or architect.
Once the project is complete, you could then look to remortgage based on the new market value. For more information, contact our mortgage partner, Embrace Financial Services
Make sure you are properly insured
If you are carrying out a property renovation project, it is worth investigating specialist insurance. This is essentially a ‘site insurance’ policy, which normally covers you for:
- Damage to the existing structure of the building
- Theft of materials, tools and equipment from the site
- Injury on site
Note that whatever insurance your builder may have, that does not cover the existing structure, so it is important to consider taking out your own cover.
Insurers will need full details of the works you are planning so they can properly assess the risks and tailor the policy accordingly. They may require certain works or jobs being carried out by certain professionals – e.g. if you are constructing a basement, they may refuse cover if you tackle it yourself instead of using a properly-qualified and suitably experienced contractor.
The price of your premium is likely to be somewhere between 0.5% and 1% of the overall build cost.
For advice what your target market are expecting from rental properties in your area, simply call into your local Reeds Rains branch and one of the lettings team will be happy to discuss your options.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.
Reeds Rains may receive a referral fee from Embrace Financial Services for recommending their services. You are not under any obligation to use their services. Embrace Financial Services is an associated company of Reeds Rains.