What mortgage should I get for my conversion?
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I have recently bought a very run-down property through an auction. I had enough money to pay for it outright but will need a mortgage for the extensive work that needs to be done to make it habitable. Can I take out a mortgage to do this on the new property or would it be better to borrow against my main home?
Diane Fish of Smith & Pinching responds:
There may be a number of feasible options to meet your mortgage needs and we would need to look closely at your overall situation and affordability before advising on the best route. However, I can give you some pointers.
Some self-build lenders will also consider conversions and renovations. However, they will sometimes stipulate that the property has to be owned for a minimum period, such as six months, before they will secure funds upon it. Typically, this type of loan would be provided on an Interest Only basis while the work is being done. Once the work is completed, you would then be able to switch to a standard residential mortgage.
The alternative of borrowing against your main residence is a possibility: some lenders will consider securing lending for renovations to one property against another owned by the same person. If you have a mortgage on your current property, you have three potential routes: approach your current lender for additional money, re-mortgage with a new lender or look at what’s called a Second Charge loan against your current home. A Second Charge loan is a second separate mortgage to run alongside your existing mortgage. The availability of this will depend on your current mortgage and any unmortgaged equity you have in your home.
Whichever route you adopt, the availability and suitability of any mortgage will depend on your circumstances and affordability. I suggest you consult an independent mortgage adviser to ensure you explore all the options available.
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 mortgage advice fee is £700. Any opinions expressed in this article do not constitute advice.
For more information, please visit www.smith-pinching.co.uk