Renovation Mortgages

If you’re planning to refurbish, extend, or modernise a property, a renovation mortgage could make financing your project possible. Here, we’ll explain how home renovation mortgages work, who qualifies for these loans, available UK lenders, and some alternative options to consider to finance a house renovation.

What is a renovation mortgage?

A renovation mortgage is a type of home loan that provides funds not only to purchase a property but also to carry out improvements or renovations. It’s particularly useful if you’re buying a property in poor condition, it's un-mortgageable in its current state, or you simply want to upgrade and add value immediately.

Depending on the scope of the home renovations, you might need a standard mortgage with extra borrowing, or a specialist renovation or self-build mortgage that releases funds in stages as the project progresses.

How do renovation mortgages work?

It depends on the structure of your financing, but renovation mortgages typically release funds in one of two ways: either as a lump sum at the start, or in instalments as work is completed. The right structure will depend on the extent of the home renovations.

For major renovations or structural work, lenders may offer a stage payment mortgage, in which funds are released after each key phase, such as foundation work, roofing, and interior finishing. This approach protects both the borrower and the lender, ensuring the property’s value increases as the project progresses.

For lighter refurbishments to a house, you might instead take out a standard residential or buy-to-let mortgage and borrow extra for the home improvements. Lenders will look closely at your plans, budget, and whether the property will be habitable during the work.

Considering the example below, the initial phased payment of £100,000 is released initially to purchase and renovate the property, followed by a second payment of £50,000 following completion of the works. The mortgage is provided at 70% of the project value once the renovation is complete. 

Property price: £150,000
Renovation cost: £30,000
Projected value: £250,000
Refurbishment mortgage: £105,000 - 70% of projected property value
Payment 1: £100,000
Payment 2: £50,000

Eligibility criteria for renovation financing

When assessing your application, lenders will consider several key areas before approving a renovation mortgage:

• Property condition: The property must be structurally sound or capable of becoming habitable within a reasonable timeframe.

• Planning permissions: For major work or extensions, planning approval and building regulation consent are usually required. If it’s a listed building, you’ll need listed building consent.

• Costs and project details: Detailed renovation plans, timelines, and quotes from qualified contractors or professionals are often required to support your application.

• Renovating experience: Applicants with prior renovation or property development experience may have more lending options. First-time buyers looking to renovate will likely have fewer lenders to choose from.

• Deposit and loan-to-value (LTV): Expect to provide at least a 15% deposit (of the property’s projected value post-renovation), though larger deposits may be needed for complex or uninhabitable properties. Exact deposit requirements can depend on the type of finance.

• Affordability: Like with other mortgages, lenders assess your income, employment status, and credit history to ensure repayments remain affordable. If the property is an investment, projected rental income plays a significant role.

How to get a renovation mortgage

Getting a renovation mortgage can be more complex than applying for a standard home loan, but proper preparation can make the process smoother.

Here’s how to improve your chances of getting a mortgage for a house renovation:

1. Work with a specialist broker: Many lenders offering renovation mortgages require an introduction from a broker. A specialist broker can match you with suitable lenders and help you present your renovation project in the best light.

2. Get your documents to hand: Gather any details relating to planning permission and realistic budgets, along with documents such as proof of income and address, personal ID, build schedules and insurance details.

3. Choose the right survey: A full structural or renovation survey is usually required and can help reassure lenders that your property is viable and worth investing in.

4. Apply for finance: It’s crucial that you apply for the correct type of finance for your particular home renovation and approach the right lender for your needs. An experienced broker will introduce you to the most suitable option.

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Alternative ways to fund a home renovation

If a renovation mortgage isn’t the right fit, there are several other ways to explore financing your project:

• Borrow more on your existing mortgage: If you already have equity in your home, you may be able to remortgage or look at additional borrowing. Some lenders may allow remortgaging for specific purposes, like building an extension.

• Second mortgage or secured loan: You could look into a second mortgage for home renovations (or another secured loan). This allows you to borrow against your property without changing your primary mortgage deal, using the house as security (collateral) for the loan.

• Bridging loan: A short-term bridging loan could be used to fund purchases or renovations before refinancing or selling.

• Home improvement loan: This is a specific type of unsecured personal loan, suitable for smaller projects or quicker refurbishments.

• Development finance: Best suited for large-scale or commercial renovation projects involving multiple units or major structural work, development finance is helpful for both conversions and ground-up developments.

• Unsecured loan: For smaller renovations and fixes, you can use standard unsecured borrowing with something like a credit card or personal loan.

UK renovation mortgage lenders

It’s often best to approach a specialist home renovation mortgage lender, but here are some examples of popular mainstream lenders that may be open to this type of financing:

• Nationwide Building Society: Permits additional borrowing for home improvements or renovations on existing mortgages (subject to affordability and the property’s condition). Nationwide may consider properties that need light refurbishment as part of a purchase, provided the home is habitable.

• Ecology Building Society: Offers specialist renovation, conversion, and retrofit mortgages, particularly for eco-upgrades and energy-efficiency improvements. Ecology may consider lending up to 90% of the property’s value, with discounted rates for environmentally focused renovations.

• Cumberland Building Society: Provides self-build and renovation mortgage products that release funds in stages as work progresses. Cumberland may consider uninhabitable properties and lend based on the post-renovation value, provided there’s a clear, costed project plan.

If you want to find the best renovation mortgage lender for your individual plans, it’s worth having a chat with an experienced broker to get some tailored advice.

Renovation mortgage rates

Calculating rates for renovation mortgages can vary depending on your deposit size, the extent of the renovations, the property condition, and whether you’re borrowing in stages. Generally, rates are slightly higher than standard residential mortgages due to the added risk during renovation.

Once the work is complete, many borrowers choose to refinance onto a standard mortgage product, which can often be at a lower rate.

If you’d like to compare current renovation mortgage rates for free and speak with a specialist broker to find the best deal for your project, you can use our free comparison tool below.

Why choose Money Helpdesk for your home renovation mortgage?

We specialise in helping homeowners, investors, and developers secure renovation mortgages tailored to their needs. Whether you’re restoring a property or upgrading a buy-to-let, our expert brokers can help you find the right lender and financing.

Here’s why people across the UK choose Money Helpdesk for their renovation mortgage:

• Access to brokers who specialise in renovation financing

• Your first chat is free with no obligation to proceed

• Our advisors are 5-star rated on leading review platforms

• Introductions to lenders offering tailored renovation finance solutions

If you’d like to compare the latest rates or speak to a renovation mortgage specialist, you can get started here.