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5 finance rules to follow when buying a home to renovate

Buying a home with renovations in mind? There's more to these projects than just a spot of DIY. Here are 5 finance tips you need to know...

5 min read

When buying a new home, it’s common for renovations to be at the back of your mind. Perhaps you’re looking for a challenge and want to transform a derelict period property, or maybe you just want to spruce up your new home to suit your needs.

Whatever the scale of your potential renovations, if you plan on buying and then renovating, heed this advice from our Resi Finance team…

Understand the types of financing available

When it comes to financing your renovation, there is a range of finance routes you might choose to take. Options include…

  • Savings
  • An unsecured personal loan
  • Mortgages
  • Remortgaging or using a further advance
  • Credit cards

To understand what the details of these options are and which is best for your purchase, it’s highly recommended that you talk to a specialist broker before you purchase. This will not only ensure you avoid a bad payment plan, it’ll also help map out your potential budget.

At Resi, our finance experts work alongside our designers, meaning we can look at any potential properties and advice not only on loans and rates but renovation options too.

Learn more about Resi Finance here.

Is your potential property habitable?

If you’ve got your heart set on a big renovation, it’s important you consider the existing state of the building. Properties that are deemed not habitable will have significantly fewer finance options than other ready to live in homes.

If your potential investment is…

  • Derelict
  • In need of a conversion
  • Lacks a working kitchen or bathroom

Then you’ll find a majority of high street lenders will be reluctant to offer you a traditional mortgage. In order to finance your project, you’ll likely need to reach out to a specialist who has experience in renovation mortgages or self-build financing.

Make sure your renovation is adding value

Homes are primarily places for us to live in and enjoy, but that doesn’t mean you should neglect the investment aspect. After all, renovations can be very costly projects and one way to ease this financial pressure is by knowing the work you’re carrying out will pay off in the future.

If you want to increase the price of your home, these are the best projects to consider...

  • Extensions
  • Loft conversions
  • Kitchen renovation
  • Adding a new bathroom
  • Adding a new bedroom
  • Creating an ensuite

Of course, the housing market isn’t set in stone and there are plenty of factors that go into creating home value. The quality of your end results will be a big factor in the value you create, likewise, you’ll need to balance out the exchange you may have made in the process. A rear extension can add a lot of value, however, if you’ve lost a significant amount of green space in an area where gardens are highly sought after, then you may have lost more worth than you’ve gained.

For more information, see our guide to adding value.

Loft bathroom
Addition bathrooms like this loft ensuite can add value to your property. Project by Team Resi.

Are you renting, inhabiting, or flipping?

It’s worth bearing in mind that not all renovations are the same, as there can be different motivations for taking on certain projects. Some people will be renovating to create the perfect home for their family, others will be trying to turn a profit, and others will be designing with tenants in mind. Which route you’re going down will ultimately affect not just the work you’ll be carrying out but the budget you’ll require.

Inhabiting: if you plan on living in your property for a long time to come, there will be more long-term financing strategies you can employ and you should also be able to make sure of your home’s future value. In some cases, it might be worthwhile using a short-term loan upfront before opting to remortgage after the work is complete.

Flipping: if you plan on selling your home once the project is complete, then your financial strategy should be based on what profit you intend to make. This profit could then allow you to pay off your loan quickly, meaning you avoid the need for a lengthy and high-interest repayment plan.

Renting: Having tenants move in? While finding finance should be similar to whoever you choose to stay in the property, there will be some extra costs you’ll need to bear in mind. Regulation around rental properties is different to a normal household, so you’ll not only need to budget meeting standard building regulation, but you’ll also need to find funds for these other requirements too, such mould prevention and fire safety.

Know what you’re dealing with

Our number one renovation tip? Don’t go into your purchase blind.

Many of the most expensive repairs you’ll need to make won’t be visible to the naked eye. Therefore, we highly recommend that you get a surveyor on board who’ll be able to properly map out all the renovations you’ll need to cover in the future.

Common concerns you might miss during a viewing include…

  • Roof damage
  • Faulty electricals
  • Poor plumbing
  • Structural damage

These issues can cause massive headaches for a homeowner down the line and can be very expensive to rectify. The last thing you want is to tie yourself down to a property you can’t afford to repair.

Get tailored advice for your project

Every project and home is different. Therefore, if you’re looking for advice on a potential new home or undertaking renovation, it always helps to speak to an expert.

Luckily, at Resi, we have both architectural and financial expertise all under one roof. To speak to a member of our team, simply book yourself a free no obligation consultation here.

Please note:

  • You may have to pay an early repayment charge to your existing lender if you remortgage.
  • Your home may be repossessed if you do not keep up repayments on your mortgage.
  • There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is £495.

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