Conversion Mortgage

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Conversion Mortgages

Our MD Daniel Condren talks about conversion mortgages. Watch below


What is a conversion mortgage and how does it work?

A conversion mortgage is a form of finance for people who wish to convert derelict or abandoned buildings into residential properties. This product is used if a customer wants to maximise their investment and is normally used by property developers or investors.

When would you need a conversion mortgage?

To convert derelict properties into residential properties you need to finance these projects and conversion mortgages are designed for this purpose.

Properties such as windmills, churches and chapels have seen a noticeable increase in conversions into residential properties as they offer space and are in great positions within a town centre or rural environment. These properties also bring the return on investment back for a property developer.

Who is a conversion mortgage for?

Conversion mortgages are taken out by investors or property developers who already have a reasonable sized portfolio and with a good cash flow. Conversion mortgages are mostly used on derelict or abandoned properties, and whilst that does present more risk, it can pay off with a financial reward once completed.

Are conversion mortgages hard to get?

Conversion mortgages are aimed at property investors or developers. You generally don’t have a first-time buyer applying due to the required experience set by a lender. For any lender, they will look at the applicant’s background such as track record, the means to do the development, overall costs and the proposed value once completed.

A broker can guide you through this process to understand the proposed value, costs of work and whether you have the right experience and means to pay back the mortgage also.

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How much can I borrow and what deposit will I need?

The amount you can borrow will vary on the gross development value of the property once the work has been completed. Speaking to architects and surveyors should give you a good understanding of the value once renovated. Deposits will vary too, but on average these are 30% of the mortgage but the lender will also need to know what funds you have available outside of the mortgage.

How long do conversion mortgages last?

A conversion mortgage is more of a financial agreement that runs between 12 months and 36 months. Conversion mortgages are more short term than residential mortgages and are paid back once you have completed the renovation. However, If your plans are to keep the property in your portfolio or to live in, then the mortgage will convert into a commercial, buy to let or residential mortgage.

Pros and cons of a conversion mortgage?

There are plenty of advantages and disadvantages for conversion mortgages. One of the biggest advantages is the added value that you can gain from your original investment and the property you have converted. The disadvantages can sometimes outweigh the advantages, particularly if the interest rate isn’t the cheapest on the market or if the costs for the project outweigh the finalised property value.

How can a broker help me with this? (Why would I need you and not do it myself?)

A broker can help in many different ways, from searching for the cheapest rates, offering advice and running through the numbers. Conversion mortgages need to be completed quickly, so by having finances and all associated information ready, a broker can action this. For a broker, they will understand how much the conversion mortgage will cost, the whole breakdown of the agreement, and whether it is viable with the end value of the property.

Your home may be repossessed if you do not keep up repayments on your mortgage

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Based in Leeds, One Mortgages & Protection Limited offers impartial and unbiased advice to customers UK wide, no customer is too far away to help.

Registered Office: One Group 1 Moorfield Chambers Moorfield Crescent Yeadon Leeds LS19 7EA

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Your home may be repossessed if you do not keep up repayments on your mortgage.

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