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How To Finance A Major Home Renovation

With a few alterations, it could be your dream home. As our lives change, so do the requirements we have for our homes. Not many of us end up moving straight into the ideal place for a variety of reasons – indeed, it often works out as a better idea to renovate and extend the homes we already have – you may love the location or dread the stress of a house move. But whatever the circumstances that make you want to develop a property, one thing is pretty certain. Before picking out paint colours and textiles you are going to need to think about the financials of your build.

Specialist Lenders

You may be thinking of approaching an institution you have used before to finance the work- perhaps a mortgage company you purchased your last property with. That may work if you’re planning an extension project, but for significant renovation works, or even a self-build, be aware that most mainstream lenders will not grant a mortgage on a property they class as ‘uninhabitable’. That means you may well have to use a specialist lender if you want to finance a property that has no working kitchen or bathroom. They can be hard to obtain, so do your homework in advance. If you are extending your existing home, financing is much easier to come by but you will still be subject to substantial checks into your credit history and other factors to assess the risk involved in them making the loan. They may need to know that you are working with a reputable and fully qualified building firm such as particularly if specialist skills are required due to the location or condition of the building.

Financing Your Renovation

On a more typical renovation project, you will probably be able to secure some 80-95% of the current property value. If essential repairs are deemed necessary by your lender, they may choose to withhold a portion of the funds, until these works are carried out – this is known as a ‘retention’. Once the property is re-surveyed and the essential works are complete the remainder of the balance will be released to you. This could include things such as damp proofing, repairs to the roof, electrical rewiring or repairs to the central heating system – anything connected to the structure of your home. If retention is made, then you will need to explore alternative routes of funding the repair works in the meantime.

Keeping Your Security

While you may be dreaming of light-filled glass dining rooms and bi-fold doors, you actually need to consider more prosaic matters such as insurance. Your existing home insurance policy is unlikely to cover the work that takes place during a renovation, so make sure extra cover is in place. Should anything go wrong and you don’t have cover in place then you are risking your entire investment and would be left in a devastating position.

A few simple financial calculations at this stage can safeguard your project and keep you on track to the home of your dreams.