Watch any episode of Grand Designs, and you will likely see a beautiful barn conversion with a sweeping roofline, contemporary interior and astonishing views.
The difficulty is that financing a barn conversion is a significant challenge, and renovating a rustic outbuilding or farm structure into a modern home is no small project.
If you have dreamed of converting a barn into your own unique home, this guide from the independent mortgage brokers at Think Plutus sheds light on the many factors to be aware of before you apply for financing.
Advice on Applying for a Barn Conversion Mortgage
A barn conversion mortgage is more complex than a regular property because the loan value must cover the cost of the conversion work before you can move into the building.
Your lender will need to evaluate the viability of the planned conversion, looking at much more than the current and forecast value, such as:
- Planning permission requirements
- Right of way access considerations
- Listed buildings or those in conservation areas
- Conversion budget and contingency planning
- Restrictions on agricultural developments
Because your mortgage value will cover the purchase cost plus the restoration work, the lender needs considerable assurance that your conversion will be successful and that the converted barn will be worth as much as you expect.
Planning Permission for Barn Conversions
Many barn conversion projects, perhaps surprisingly, do not require full planning permission. Permitted development rules allow a farming building to be renovated into a habitable home.
You will need to notify the local authority before the conversion begins and can be refused permission if the technical plans do not meet specific conditions and regulations.
Why does a mortgage lender care about planning permission?
Imagine you take out a mortgage to purchase a barn with plans to convert it into an incredible home. If you need planning approval and are rejected, the property could be effectively worthless as a home.
Selling an agricultural barn with no planning permission (or a rejected application) may be very difficult and mean you end up in a position where you do not have the finances to repay the amount borrowed.
Mortgage lenders will actively avoid ever getting into repossession or negative equity situations, so they will want to verify whether planning permission applies.
Where it does, you are far more likely to be approved for a mortgage if you have the approval or an indication that your application will be granted.
Barn conversions that involve rebuilding the structure require full permission and are best financed with a self-build mortgage.
Converting a Barn With Agricultural Restrictions
We mentioned restrictions because these rules apply where the local authority grants consent with limitations on usage.
For example, the property may not be eligible to be used as a residence or might only be lawfully converted into a dwelling if the work complies with certain conditions.
If the barn has these restrictions, it can be very difficult indeed to find a mortgage lender. Lifting restrictions can be a long-term project, and there is no assurance that you will successfully overturn any current limitations.
Lenders steer clear of such complex scenarios because the process is costly and may impact the overall value of the property.
Right of Way Considerations for a Barn Conversion
Rights of way exist throughout the British countryside.
Still, you may have trouble applying for a mortgage if you do not have a guaranteed access route – not least because the conversion work will normally involve commercial vehicles.
A clear right of way is essential for mortgage approval, and you should submit formal architect plans clarifying where a right of way exists.
Applying for a barn conversion mortgage without specifying the right of way routes could mean a lengthy assessment process, with rejection more likely.
Mortgages for Listed Building Barn Conversions
Any property that has listed status or is within a conservation area is a tricky prospect for mortgage lenders. The rules will dictate what work you can and cannot carry out.
Listed building consent is a process whereby you apply to the local authority for permission to conduct your conversion.
You will not be able to apply for a barn conversion mortgage secured against a listed building without this permission.
Calculating the Mortgage Required for a Barn Conversion
The general rule of thumb is to add at least 15% to your anticipated project budget, building in a contingency for costs that run higher than expected or covering delays to the conversion work.
Mortgage lenders will scrutinise your budget carefully, ensuring that you have created a financially sound budget with a contingency provision.
Lenders will also need to inspect the work schedule and will usually refuse the application if they believe you have underestimated the work costs.
Mortgage Options to Finance a Barn Conversion
Several potential mortgage products may be suitable, depending on the type of barn conversion and the nature of the project.
Below we have listed some alternatives and explained when they might be the right solution.
Bridging Loans for Barn Conversions
A bridging loan is a short-term financing product often used to purchase properties ineligible for a regular mortgage.
Barns currently not in a habitable condition cannot usually be purchased with a residential mortgage. A bridge loan may provide the appropriate funding.
You will need to demonstrate how you intend to repay the bridging loan – often by remortgaging once the conversion is complete.
Interest rates on bridging loans are higher than residential mortgages but are a temporary option where a standard mortgage is unavailable.
Using Development Finance to Convert a Barn
A development finance product can be used for barn conversions on a large scale.
This type of funding product is also sometimes used where you intend to demolish the existing structure and rebuild or want to renovate or rebuild multiple outbuildings, either to create one larger property or several residences.
Extending a barn to increase the floor space could also be an eligible project to finance this way.
Self-Build Mortgages for Barn Conversions
A self-build mortgage is designed to produce the capital needed to build a new property and could be appropriate if you want to either build around the existing structure or knock it down and start again.
Self-build funding works differently from a residential mortgage because the finances are released in tranches at each milestone part of the building work.
The lender will need to inspect the site and confirm whether it meets regulatory standards before they will release the next stage of funds.
Applying for a Residential Mortgage to Convert a Barn
Applicants living in a habitable barn looking to convert the property can use a residential mortgage, depending on the costs of the renovation work and the value of the building.
However, finding a mortgage lender who will deem this type of property eligible for a residential mortgage is not always easy.
Barns are commonly made from non-standard materials and are, therefore, a specialist property from a mortgaging perspective.
Expert Support With Barn Conversion Mortgages
As we have shown, there are several considerations when applying for a mortgage for a barn conversion, and the criteria the lender will use vary considerably from a standard residential property purchase.
The right financial advice and information are essential to ensure you can move forward confidently and apply to suitable lenders who will be happy to help you reach your barn conversion aspirations.
Please contact Think Plutus at your convenience if you are ready to get started or want to understand more about which mortgage product would best fit your requirements.
As an independent, whole-of-market brokerage, we deliver impartial, professional support at each stage to help you make informed financial decisions at each step of the mortgage process.