Renovating property – challenging, but rewarding

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Derelict properties can be purchased for low prices and, while restoring a neglected property is not a task that should be underestimated, there is real value in doing it.

To complete a renovation project requires expert help from architects and builders, so it can be difficult to fund a renovation project. If you are tempted to invest in derelict property then, unless you have plenty of funds available, you will need a loan for both the purchase and the renovation work.

If you own existing property with enough equity, you could remortgage. It is also possible to obtain a bridging loan secured against an existing property.

If the purchased property is uninhabitable, it may be difficult to obtain a mortgage. Some lenders will not release funds until the property is in a condition to house people.

Other lenders provide stage release mortgages. These fund the initial purchase of the property and release money after defined stages of the renovation project have been completed.

There are two types of stage release mortgages: ‘in arrears’ and ‘in advance’. The former option finances a portion of the initial purchase, then after each renovation stage has been completed, further money is released. This means that the borrower must pay for each renovation stage before receiving the money.

In advance loans, meanwhile, make funds available before each renovation stage. Normally, there will be around four stages. The mortgage will not cover 100% of the renovation or purchase costs. Borrowers may need to contribute 15% or more of the cost from their own finances.

Whether you renovate property to live in or to sell for profit, restoring derelict property is difficult but satisfying.

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