Mortgages – Renovation/Conversion

The better you handle your finances, the less likely you are to go over budget

What mortgages are available for renovations and conversions?

Traditional self-build mortgages are suitable for renovation or conversion projects. They release stage payments in arrears, which can sometimes cause cash flow-problems. However, there are products available that release funds in advance over six stages of the project, which makes it easier to stay in your current house as the build progresses.

Self-build mortgages are very similar to conventional mortgages – with lenders usually willing to provide up to five times a single income or up to 60 per cent of your monthly income.

Stage payments for Self-build mortgages

Stage Renovation and Conversion
1 Purchase of property
2 Initial costs and structural work
3 Weather tight
4 Plastering and services
5 Second fix
6 Completion

Types of mortgage

Self certification – is ideal if you’re self employed or a contractor and have a number of incomes from different sources or will have difficulty proving your income.

Fixed rate – you pay a set rate for a fixed period of time.

Tracker ­– it tracks the Bank of England’s base rate by a set percentage, so when it changes the amount you pay changes with it.

Flexible – allows you to make payments that exceed the agreed payment, which can dramatically reduce the term of your mortgage.

Bridging Finance

Who’s it for?
Renovators and converters who only require short term finance on their project and don’t have sufficient income to justify full loan amount, but have other sources of finance.

What’s it based on?
The short term loan is based on the equity of your current home and your ability to meet the monthly interest payments, established by proof of income or saving and investments, or a combination of the two.

How long is the term?
This type of loan is typically available for up to three years, allowing two years to complete the work and one year to sell your current property. If you finish your project before the three year period most providers will allow you to repay your loan, but some may charge a penalty.

How much can I borrow?
Most lenders will give a maximum advance of up to 95 per cent on the value of the property and up to 95 per cent of the build costs, to a maximum of 95 per cent of the completed value.

Mortgage Protection

Mortgage payment protection ­– this covers your mortgage payments in the event of you being unable to work for an extended period of time due to redundancy, disability, accident or illness.

Life insurance cover – will repay your mortgage if either you or your partner becomes seriously ill or dies.

Critical illness cover – would repay your mortgage if you were to get one of many illnesses, such as cancer, stroke or heart attack causing a substantial reduction of your income.

For more help and advice visit our online mortgage advisor.


Useful Contacts

Mortgage advice: www.mortgages.co.uk
Mortgage Advice Bureau: www.mortgageadvicebureau.com
Mortgages Online: www.mortgages-online.co.uk
The Mortgage Advice Company: www.mortgageadvicecompany.co.uk

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