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Renovation Mortgages – Can you include renovation costs in your quote?

Finding a mortgage which will allow for renovation costs to be included, can be tricky. But, is it impossible? Find out below.

Some people look at a house and see what it is, at face value. But others? They see potential. A pet project that they can mould into the home of their dreams, and it is possible. However, when it comes to getting a mortgage for a renovation project, it may not be that simple.

One question that is thrown around a lot is, ‘can you get a mortgage that includes renovation costs?’ The answer? Well, it’s in this article. MO’s done their research, so you don’t have to. Scroll down if you’d like to know.

Let’s find out…

Can I get a ‘renovation mortgage’?

Well, technically no..but don't stop just yet. There’s a lot that goes into how lenders calculate a mortgage, which we’ll get into. If you want to find out the why keep reading.

See, when you apply for a mortgage, one of the key things your lender will assess is the price of your property. Let’s say you’ve found a great home for around £300,000, but the suggested work to improve and renovate it is going to be around £100,000, you’ll find that lenders aren’t so keen to part with the cash.

That’s because lenders will only afford you (at most) 95% of the purchasing price, which means no matter how much potential you see in the house, if you want it, you’ll have to find the funds yourself. Now, this can either be through a personal loan or even a credit card, but you’ll need to raise the funds yourself for the renovation works. Some lenders will allow for building costs; however, this only comes into place when the work is complete, and the property is revalued.

Because, technically, your mortgage lender owns your house (until your mortgage is paid off in full). It’s on loan, which means lenders aren’t so forthcoming with a ‘renovation mortgage’. Specialist lenders will sometimes allow a ‘renovation mortgage’, but you’ll need to search for these thoroughly.

What if I’m moving house?

Ah, so we come to you moving to a new house. If your home is valued at a higher price than your proposed property, you won’t need a ‘renovation mortgage’. Because selling a home valued at £600,000 to buy a property worth £400,000 means you’ve got £200,000 in your pocket after the sale (as long as you have enough equity within your current home and are accepted for a loan to borrow the same amount of money). So, you can fund the cost of renovations yourself – just think about the affordability, as if there’s a lot of work, you may not be able to live in the property being renovated.

We hate to be the bearers of bad news, but it’s not easy – however, it’s not impossible. Some companies are happy to offer renovation mortgages, but this usually comes with another interest rate on top of the building work, PLUS a significant deposit put down so you can borrow. This can be around a 10% deposit of the suggested building work.

Finding the right mortgage for you isn’t easy, which is why Mortgages Online can make it easy. Enter all your necessary details and find mortgage rates that are right for you. Renovation mortgages aren’t easy to find but do some research to see if there’s one out there, for you.


Laura Waller

Laura Waller has been working in the mortgages industry since 2013, joining an independent brokerage in Essex. Laura has CeMAP 2 & 3 – Certificates in Mortgages Advice and Practice. Since then Laura oversees marketing for Mortgages Online, using her experience and expertise to write articles and blogs about mortgages and related topics.

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