How Renovation and Conversion Mortgages Work

When you are renovating or converting you are likely to need money for the initial purchase of the property and then for the building works.  Some mortgage lenders will refuse to lend on properties that are uninhabitable while others will lend based on the current value of the house but will then not lend anything further until the project is complete and the property can be re-valued.  This is known as applying a retention to the borrowing and will only be suitable if you have access to sufficient cash to pay for all of the building work.

An alternative is a stage payment mortgage where the building work is broken down into identifiable stages.  The stages in a renovation or conversion are generally:

Funds from a stage payment mortgage can be paid out in two ways – either at the end of each build stage, known as arrears, or at the beginning of each stage, known as advance.  The advance stage payment mortgage is unique to BuildStore.

With a traditional arrears stage payment mortgage the lender will release money to buy the property, usually up to 75% of the purchase price or value of the property and will then release the money for the building costs with each stage payment being made at the end of each stage i.e. in arrears of the work being done.  This type of mortgage may be suitable if you have access to cash to pay for the deposit on the property and the early stages of the building work.

At BuildStore we recognise that not everyone who wants to renovate or convert has access to sufficient cash to pay for building works up front so we created the Accelerator mortgage.  Here money is released for each stage of the build at the beginning rather than the end of the stage giving you the cash you need to buy materials and pay your builder.  It also lends a generous percentage of the costs - up to 95% of the cost of the property and up to 95% of the cost of the build.

Accelerator is ideal for many situations, for example if you have only a small amount of cash available and don’t want to sell your existing house to release equity before your new one is complete or if you want to keep the cash you have available until later in the project to maintain a good contingency fund.

With so many different options for financing a project it is important to speak to an expert to discuss your plans as early as possible.  BuildStore has access to all types of renovation and conversion mortgage, both advance and arrears, as well as over 10 years experience in advising on the best type of finance for renovation  projects.

Compare advance and arrears stage payment mortgages

Current rates for renovation and conversion mortgages

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