Renovation Mortgages – How Can You Access Funding for a Home Renovation?

What kind of projects does a renovation mortgage suit?

Not every home renovation project is the same. Some might involve a cosmetic refresh – new flooring, a kitchen refit, knocking through a few walls – while others involve gutting the place completely or even doing structural rebuilds. Renovation mortgages are ideal for the more ambitious projects that wouldn’t qualify for a standard mortgage because they’re not technically habitable. That might be a house with no heating, plumbing, or electrics. Or when taking on a property that’s no more than a ‘shell’ that needs everything from a new roof to underpinned foundations.

Build It readers Linda and Vic Woods undertook a complete renovation and retrofit of this 1980s bungalow, transforming it into an ultra-sleek, modern abode that’s unrecognisable from its original aesthetic. Clad in zinc and with plenty of full-height glazing, this unique home – designed by NVDC Architects – suits the owners’ lifestyle perfectly. The project took around 11 months to complete and cost £731,000. Photos: David Barbour

Renovation mortgages are also a great choice for barn conversions or when converting non-residential buildings into homes. Other projects might include period properties in need of sympathetic restoration, properties with damp or subsidence issues, or even unmodernised homes stuck in the 1970s – all of these can benefit from this type of funding. When it comes to the suitability of a renovation mortgage, the key is the potential to add value. They help to bridge the gap between a property’s current state and value what it will be worth once it’s finished.

How to get a good renovation mortgage deal

Renovation mortgages are more complex than typical home loans, so preparation is essential. Lenders are investing in you and your project just as much as in the property itself. They’ll want to see you’ve done your homework. You’ll need a clear renovation plan that includes architectural drawings (if necessary), a full breakdown of costs, a build schedule, and cashflow. It all must make sense, so the more detailed, the better to demonstrate that you’ve thought everything through.

To prove your case, you’ll need realistic quotes from builders, a contingency for unexpected costs, and confirmation of planning permission. Some lenders might also require full plans approval for building control before too much money is released.

This project in Walthamstow, London, saw the transformation of a Victorian property into a light filled, modern home, thanks to a clever renovation and extension. A vaulted ceiling and exposed beams pack in plenty of character to the space, and sustainable finishings add to the healthy living environment. Designed by Whittaker Parsons, the project cost £162,000 and took 11 months to complete

Affordability plays a big part, and even though renovation mortgages are based partly on the property’s end value, lenders want reassurance you can afford the repayments. So, make sure your finances are in good shape – having a decent credit score, low existing debt, and a steady income all helps. Some lenders will also look at your wider financial habits. Do you save regularly? Do you live within your means? Do you like a flutter? It all counts.

Then there’s the deposit. Traditional mortgages usually require a deposit of at least 5% to 10% of the purchase price, whereas renovation mortgages expect a bit more – typically 15% to 25%, depending on the lender and project.

It’s all quite complicated, so working with a mortgage adviser who specialises in renovation finance can be a huge help. They understand the complexities of renovation projects so are able to navigate you through them, helping to pull together the best application to secure the best deal.

Are there any downsides to mortgage renovations?

Renovation mortgages might unlock a project, but because they’re more complex they come at a cost. Arrangement fees and interest rates are usually higher than for standard mortgage products, and then there’s the added expense of a specialist mortgage broker to navigate the process and valuation fees to draw down funds. It all adds up, but it’s worth remembering that the added expense is short lived; you’re free to switch to a more competitive mortgage product at the end of the project.

What are the options if you already own the house?

If you already own the property or secured a standard mortgage before realising the scale of work required to improve it, there are still a few options. Firstly, it might be worth reviewing your financial plans. For those with substantial renovation, it could be worth redeeming the current mortgage and switching to a specialist mortgage product, better suited for the project.

Some of these specialist products are designed to release funds based on the cost at each stage – ideal if you need the money upfront to keep the project on track. It might be worth considering a traditional remortgage.

For their extension and renovation project, Lia and Allan Gill transformed a 1970s bungalow into a characterful, contemporary home. The project cost £240,000 and took six months to complete. The house now has easy access to a lovely landscaped garden, and the extension offers a new entrance, bathroom, dressing room and a vaulted master bedroom. Photos: David Barbour

If your property’s value has gone up, you might be able to release equity to fund the renovation work. Alternatively, your current lender may offer a “further advance” which means letting you borrow more on top of your existing loan. This tends to be quicker and simpler than remortgaging, although not every lender will offer it for major works.

Another alternative might be a bridging loan. Bridging loans provide short-term financing until a longer-term solution is arranged. These might suit you if you’re taking on a substantial renovation, and especially projects that render the house uninhabitable during works.

A successful renovation project requires much more than the ambition to create a wonderful home from the bones of a dilapidated house. It requires a good sense of what’s realistic along with thorough financial planning and a flexible funding model that accommodates the inevitable renovation challenges.

For the right kind of project, renovation mortgages can be a lifeline for home improvers who are willing to put in the work to transform unloved buildings into beautiful, functional homes. And if you can combine the renovation work with high-quality sustainable upgrades, then green mortgage products can offer even more financial benefits and environmental rewards.

FAQs

Robert Rhodes Robert Rhodes, director at Robert Rhodes Architecture + Interiors, answers your renovation FAQs. The practice is an award-winning London studio driven by a love of old buildings, and focused on exceptional renovations. Robert studied architecture in the USA and Italy, and has been in professional practice in the UK for more than 20 years.

I want to renovate my house, where is the best place to start?

• Consider your brief A good place to start is to think about all the things that you want your house to do for you, that it currently doesn’t. Think about all the micro-stresses that, if money was no object, you would like to fix. Then, it’s time to consider your absolute non-negotiable requirements. A good working brief is about finding the workable balance between the two, so that you renovation can be delivered to a standard that will make you happy, and stay within your budget.
• Consider the process Think about timelines and the order in which you’d like to move forward. For example, are you going to move in first and then renovate room by room? Do you think you’ll need planning consent in order to progress your renovations?
• Find the right help Decide who you would like as part of your project team. The UK is full of brilliant architects and choosing the right one can be daunting. Therefore, it’s worth researching practices that work in your area, on your type of project and in your budget. Thinking further ahead, do you have a builder in mind or do you want recommendations? If you’ve decided to do the work yourself, make sure you have the time and resources to do so.

What do I need to factor into a renovation budget?

Before doing anything, perhaps the most important factor to have clarity on, is how much money you are willing to spend on your home renovation project. A good architect will work hard to make your money go as far as it possibly can. It is also important to consider that at the beginning of a project, a budget is primarily a goal. Cost planning is a process, so once you have set your goal – ie your budget – the next step is to put your brief into a spreadsheet, breaking this down by element or item, with costs against each.

Start by deciding what you need to allocate for the basics (e.g. walls, floors, bricks, plumbing, insulation, etc). Then, see what’s left for the things you’d like to get creative with (e.g. tiles, joinery, light fittings, radiators, ironmongery, etc). The more thorough you can be at the cost planning stage, the better off you will be going forward. If you know what you want to spend and have an idea of how this can be spread across different elements, you’ll make short work of the design process, and the right solutions will present themselves.

Robert Rhodes Architecture + Interiors have renovated, extended and reconfigured this once-neglected terraced house in North London, transforming it into a light-filled, joyful family home. Photo: Matt Clayton Photography

What renovation works should I prioritise if I want to boost my home’s value?

The best place to start if you’re solely looking to boost a home’s value, is to speak to an estate agent. They will likely say the best way to increase value is to add square footage. If you’re looking to extend your house in a cost-effective way, then I’d suggest starting with the loft. Altering a timber framed roof is likely to be cheaper than adding a brick and block extension, for example, at ground level.

It is also likely that adding bedrooms and bathrooms will boost a home’s value more so, than increasing the living area. Plus, if you’re your house is not situated in a conservation area, and it doesn’t have a listed status, it’s possible that a loft conversion may also fall under permitted development (PD), which can often simplify the renovation process further.

Do I need an architect for a home renovation? What benefits will they bring to a project?

The short answer is no; you don’t need an architect to renovate a house. In my opinion, it comes down to how much faith you have in your own skills, how much time you have to do things yourself, how much risk you are comfortable to take on, and how much of a safety net you have to spend your way out of a problem.

In most home renovation projects, in my opinion, there is simply too much money at play to go without the help of an architect. One of the main benefits is the sense of support, security, and clarity that architects can provide. Managing a renovation is not an easy or transparent process, and it can be daunting and stressful.

The right architect will flip that on its head and make the whole process a joy. There is no reason it shouldn’t be fun – homemaking is fun, and thinking about how to make your property the best it can, should be an exciting prospect. An architect’s experience can instil confidence that the right things are being considered at the right time, in the right order, and to the right degree. They should be able to keep everything in order and inspire the rest of the team to work together to achieve something wonderful. Most importantly, the right architect should be able to interpret your requirements and give you something you never would have come up with on your own.

In addition to expertise, the right architect will have valuable connections to reliable trades and contractors. They will know how to assess their performance, and will work tirelessly in the best interest of the project to hold people to account.

An architect’s input is tremendous value for money, too. On a typical project, our fees might represent 10% of the client’s overall spend. For that money, you will get specialist guidance, the benefit of 20 years’ experience, and something beautiful, functional, and unique as a result.

Can I reclaim VAT on any home renovation works like a self build?

It’s best to ask a tax professional about your specific project. However, that being said, many of our projects have benefited from favourable tax incentives. For example, when renovating a house that has been registered vacant for 2 or more years, our clients have been able to reduce the VAT on most of the construction works from 20% to 5%. A similar tax incentive also exists for projects that require a change of use – such as de-converting a house that had previously been divided into flats.