Can we get a second mortgage for a barn conversion?

Traditional Cotswold farmyard with sheep dog, Stow on the Wold, Gloucestershire, England.

Ask the expert at Smith and Pinching about lending options for a barn conversion - Credit: Getty Images/iStockphoto

We live in an old farmhouse and have a small barn that sits in our farmyard. We’d like to convert this into a self-contained annex that we can let out via Airbnb. We’ll use it when friends and family come to stay too. We need about £30,000 to convert it – we have £5,000 in available savings but will need to borrow the rest. Will we be able to get a second mortgage to cover the cost of the work?

Diane Fish, mortgage and equity release adviser with Smith & Pinching

Diane Fish, mortgage and equity release adviser with Smith & Pinching - Credit: Smith & Pinching

Diane Fish of Smith & Pinching responds:

The answer to this is a little complicated. In essence, your situation is similar to the answer I gave in a recent column when the reader was looking to fund an extension. The big question to ask would be whether you have sufficient unmortgaged equity in your current home to cover the extra mortgage before the work is done. If so, you may be able to increase your current mortgage, take out a second charge mortgage or remortgage – provided you can show that you can afford the repayments.

However, it’s important to bear in mind that the current lender may not be prepared to allow the property/land on which the property sits to be used for an Airbnb/holiday let while still mortgaged. Letting out mortgaged property or land without the consent of the lender could have serious consequences.

If you don’t have sufficient unmortgaged equity in your home, then increasing your borrowing at this stage may be more difficult. If you are able to find alternative sources of finance, such as a family loan, for the short term, this might allow you to get the work done first then try to source the mortgage you need, assuming the conversion of the barn will increase the value of your overall property.

It is possible to get a specific type of mortgage for an Airbnb or holiday let property. However, it may be necessary to legally separate the two properties – your home and your holiday let/annex – for mortgage purposes, which might not be possible.

I suggest you discuss your needs initially with an independent mortgage adviser, who may advise you to involve a legal professional if necessary.

Your home may be repossessed if you do not keep up payments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £700. Any opinions expressed in this article do not constitute advice.

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