Updated: February 23, 2022

Barn Conversion Mortgages

Trying to finance your dream barn project? There are lots of options! Our guide will lay out all of the barn conversion mortgages and show you what to do next.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 23, 2022

A barn conversion can turn a rundown building into a stunning countryside home. If you’ve found a barn in the perfect rural location and want to renovate it yourself, be aware that getting funding can be tricky.

However, that doesn’t mean turning your dream home into reality is impossible. This guide will explain how to finance a barn conversation, what kinds of loans or mortgages are available to you, and why your next move should be to speak to a mortgage advisor.

Preparing for a barn conversion mortgage

Whether you’re just curious, have found an ideal barn for sale, already own one on land you’ve bought or inherited, there are a few things to consider before you apply for a barn conversion loan:

Planning permission

You don’t always need planning permission for a barn conversion. Permitted development rights let you convert agricultural buildings into homes without permission.

However, these rights might not apply to your project. Also, you should notify your Local Planning Authority before you start any work, as your proposal could be refused by the council. Your solicitor can help with this during conveyancing.

You’ll also need to decide if your project is a conversion or a re-build. If the local authority thinks that your plans are for a re-build rather than a conversion, then you will have to apply for full planning permission. Speak to an architect who has designed barn conversions before, as they can help.

What surveys are needed?

You’ll need structural and full building surveys, at a minimum. A chartered surveyor can help tell you what other surveys to get.

Are there any restrictions?

Some barns have agricultural restrictions, meaning the local authority has rules on who can live there. For instance, maybe only farmers or shepherds working on the land can occupy it.

Any restrictions will impact the property’s value and mean fewer lenders will be willing to offer finance. Removing these restrictions can be costly and time-consuming, so it’s best to avoid barns with restrictions.

Is it a listed building?

Getting finance to renovate a listed building can be tricky. There will be specific rules about what you can and can’t do to the property, and trying to change these rules will be difficult. You’ll need to apply to your local authority for listed building consent.

Do you have right of way?

Lenders will expect you to have a clear right of way to your proposed building. If you don’t have access, you’ll need permission from the local authority. Your architect should be able to tell you whether you have access when examining the property’s existing boundary lines, so include this information in your plans.

Where will you live?

Renovation can take months or years to complete, so you’ll need alternative accommodation until the property becomes habitable. If you are selling your current home to finance the conversion, you’ll need to factor renting somewhere else into your budget.

This all may seem intimidating, but the advisors we work with regularly deal with many different lending scenarios, including arranging mortgages on barn conversions. They will have a clear understanding of these issues and can guide you through them.

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How to get a barn conversion mortgage

There are a few different ways to finance a barn conversion. Let’s take a look at them in turn:

Self-build mortgage

A common way to pay for a barn conversion is to apply for a self-build mortgage or conversion mortgage. These are designed specifically for borrowers wanting to build or renovate a property, including a barn conversion.

Instead of receiving the loan all at once, funds are staggered into what’s called tranches. This can help with budgeting and keeping track of the renovation. Tranches are released once you reach these stages of the project:

  • The land/barn is bought
  • Foundations are laid or structure is renovated
  • The property is built to its eaves height
  • The roof is built and watertight
  • Internal fixtures and fittings are finished

Lenders may expect you to pay for the initial stages before releasing funds. This shows your commitment to the project, and minimises the interest you pay, as you’ll only be borrowing for the later stages.

Some self-build mortgage lenders have extra criteria, such as expecting construction to be completed within two years of the first tranche being released. If these conditions are an issue, a broker can help you avoid these lenders.

To apply, you’ll need to estimate the gross development value (the projected final value) of the conversion to determine how much money you can borrow. You’ll also need to include the architect’s plans in your proposal.

Bridging loan

An alternative type of development finance is a bridging loan. This is a short-term loan designed, as the name suggests, to “bridge the gap” until longer-term finance is arranged or the property is sold.

Most importantly, bridging loans can be secured on unmortgageable property, meaning you could use a bridging loan to buy and renovate a barn so that it is habitable, then repay the loan with a regular mortgage.

Bridging loans can be arranged quickly, and if needed can be taken in instalments, which can help with cash flow during a renovation. However, most lenders will expect the loan to be repaid within a year, although some may stretch up to 3 years.

Interest rates on bridging loans can vary. For instance, the interest on a £250,000 loan plus fees can be as high as 1.5% with the lender Goldcrest, costing you £1538 a month, or as low as 0.4% with Mint Property Finance, giving you a monthly bill of £408. Instead of making monthly payments, you could get a bridging loan where interest is rolled up and paid off along with the rest of the loan.

Residential mortgages

If the barn is already habitable, you may be able to get a regular residential mortgage to buy it. You might still want to apply for development finance if you plan to renovate it further.

Be aware that getting a residential mortgage for a converted barn can be tricky, because lenders prefer properties built with traditional materials like brick. You might struggle if the barn is mostly made of wood, for instance.

How a broker can help

Bridging loans and self-build mortgages are niche products that are usually not directly available to borrowers, meaning you’ll likely need to apply through a specialist broker. Also, renovation projects can vary massively, so working with a broker who can offer bespoke, expert advice will help you to choose the right type of finance.

The brokers we work with will be able to identify lenders who can offer the finance you need, and they can guide you through the process and help you with paperwork, saving you time. They also have access to the whole market, helping you get the best rate and find a loan that serves your needs.

If you get in touch we can arrange for an advisor who specialises in lending for barn conversions speaks with you directly.

Eligibility requirements

The criteria for arranging this type of finance will vary from lender to lender, but below are some of the key areas to consider:

  • What deposit is needed? Most mortgage lenders may only loan you 60-80% of the property’s value – though some may stretch to 95% – so you will need a deposit to cover the rest.
  • Evidence of earnings: Most lenders will expect to see proof of income to ensure you will be able to afford regular mortgage payments.
  • Project plans: You’ll need to present a “schedule of works” and a budget to your lenders. They’ll expect the budget to be realistic and include a reserve fund for additional costs; if they think you have underestimated your costs, you may have to borrow more than you planned to.
  • What’s your exit strategy? Lenders will want to know how you plan to pay back your development finance or bridging loan. Will you sell the renovation or another property you own, or refinance with a residential mortgage?

However you choose to fund your renovation, remember you’ll need to borrow enough to pay for: the costs of purchasing the property; securing planning permission; an architect to design the barn; the building materials; installing the plumbing, septic tanks, electrics, windows, insulation and heating; and builders to do the work.

Get matched with a barn conversion specialist today

Barn conversion mortgages and loans are very specialised products, and so will only be available from a few specialist UK lenders.

But this is where we can help. The advisors we work with have access to the entire market, including these specialist lenders. Our free broker-matching service quickly assesses your needs and circumstances and pairs you with a broker who has exactly the right knowledge and expertise for your situation. Get in touch with us today on 0808 189 0463 or make an enquiry.

FAQs

Can I get a barn conversion mortgage with a bad credit record?

A bad credit history can lead to paying higher interest rates and having a smaller range of lenders to choose from.

However, every lender has different rules regarding what counts as bad credit. A broker can help you to overcome the issues you may have had securing lending with your credit score.

Is a barn conversion difficult to sell?

It depends on both buyers’ appetite and the quality of the conversion but it’s worth considering how you will sell yours in the future. Ask your advisor or estate agent about the resale value of similar properties in the area, this will help you estimate the potential profit or loss on your investment.

Lots of factors will affect your property’s value, including demand to live in your location, and any changes happening in the local area, including new housing developments. As long as your conversion has been completed to a high standard and the property is well-maintained with proper heating and lighting, it shouldn’t be too difficult to sell.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different Property Types. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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