Barn Conversion Mortgages: Get It At Best Rates (2024) (2024)

Converting a barn into a home brings with it design features that simply can’t be found elsewhere, which is precisely why they are so desirable.

But financing a barn conversion is no simple task. A barn conversion involves major modifications to the existing structure of a home, which can lighten your wallet quite significantly.

Luckily, you can opt for a barn conversion mortgage to make this home makeover much more manageable. Of course, for someone unfamiliar with the housing market, it can be difficult to know which mortgage type is the best to go for.

So, to resolve your queries, we’ve created a complete guide to barn conversion mortgages.

Let’s explore what you should consider when buying or converting a barn, as well as the mortgaging options available for the same.

Barn Conversion Mortgages: A Beginner’s Guide

Converting a barn into a home is a more complex affair than simply buying a new home. As such, you may need to put in a little extra work when applying for a barn conversion mortgage.

There are a few types of mortgages that you can consider in this situation, namely a bridging loan, development finance, self-build mortgage or a residential mortgage.

Choosing between each loan type depends heavily on the kind of project that your conversion is, as explored in the following sections.

1. Bridging Loans

Regular mortgages typically apply only to residential properties that are ready to be lived in, which makes obtaining them for a barn conversion difficult.

This is applicable even more so for properties that are uninhabitable, and that’s where bridging loans can help you.

A bridging loan is an option to consider when your barn is either completely uninhabitable or close to it.

Getting a bridging loan can help you secure the funds needed to finish the conversion project and make the newly furnished barn your new home.

After moving into the new home, you can then remortgage to a residential mortgage while to clear the bridging loan.

2. Development Finance

There are a few situations where a short-term financing option may be better, which is when you may consider development finance as an option.

This loan type is typically applied to both residential and commercial properties, primarily for the development of said structures.

That said, you can use it for property conversions, renovations and regeneration projects as well.

Note that the work being done on the property must be at least somewhat major for the home to be qualified for development finance.

For barn conversions in particular, development finance may be a better option in one or more of the following conditions:

• The conversion project is large in scale
• The existing structure will be knocked down and built over
• The conversion project is a culmination of multiple development projects
• The conversion project includes major additions to the existing structure

You can read our complete guide to Development Finance for more details.

3. Self-Build Mortgages

Self-build mortgages can be a great option if your conversion project involves demolishing the existing structure and building a new home.

These mortgages only apply to build projects rather than conversions, so you may not be eligible for one if your project involves an ordinary conversion.

There are four main points to remember with self-build mortgages, as detailed below:

• You can only use the funds to build a personal property
• Self-build funds can include the land value as well, with permission
• The loan-to-value has a baseline 70% ratio
• Funds from these mortgages are provided to you in several stages

Self-build mortgage funds are released in several stages due to the risk that lenders tend to associate with such loans.

Since lenders have no way of gauging what the property would look like after the project wraps up, they treat the loan as a more risky proposition.

So, to work around this risk, they release funds during various construction stages to ensure that the mortgage amount is used correctly.

4. Residential Mortgages

If your barn conversion is fairly low-profile in scale and you have already been living in it, then securing a residential mortgage becomes much simpler.

That said, getting a loan for a converted property will still remain more difficult than it is for pre-built homes.

Lenders typically favour traditional building materials like brick over wood, which can deter them from lending you the desired amount.

In such cases, the challenge is to try to find a lender who is willing to accept mortgage applications regardless of the building material.

Process of Getting A Barn Conversion Mortgage

The main challenge of getting a mortgage for a barn conversion is to convince the lender that your conversion will be a successful project.

This is precisely what makes the mortgaging process so involved and complicated because of the inherently complex nature of remodelling projects.

So, when applying for a barn conversion mortgage, you must consider the following points and act upon them to maximise the chances of a successful application.

1. Planning Permission

For redevelopment projects, you must provide the local authority with a prior notification about the conversion project.

This is to ensure that the conversion project meets the standard guidelines and conditions to prevent potential safety or financial hazards.

Note that planning permission is not always necessary, but notifying the local government body is.

2. Agricultural Restrictions

Getting a mortgage for barns with agricultural restrictions or an agricultural occupancy condition (areas where development is typically not allowed) is close to impossible.

There is a slight chance that some lenders will be willing to fund such projects, but generally, the chances are extremely low.

Removing agricultural restrictions is not an easy or quick task, so if your barn has them, expect the process to be lengthy and very costly. Of course, it might be wiser to avoid barns with restrictions altogether.

3. A Clear Right Of Way

Lenders typically require you to have a clear right of way for the conversion project. So, you must ask your architect to provide you with it along with building plans before applying for a mortgage.

It’s vital for the success of your mortgage application that you have a clear right of way after proposing the changes to the local authority.

4. Nature Of The Property

If the barn is classified as a listed building, the terms of the mortgage may change slightly. These properties are deemed to be non-standard, and the success of a mortgage application will be gauged by lenders on a case-by-case basis.

Risk assessment plays a major role in getting a mortgage, which is why you must ensure that your credit file is as spotless as possible.

Barn Conversion Mortgage Eligibility Criteria

Being a non-standard mortgage, barn conversion mortgages have varying eligibility criteria from one lender to the other. That said, there are a few basic eligibility criteria that nearly every lender will expect you to fulfil, as detailed below.

1. Affordability

Affordability becomes a large factor in the success of a barn conversion mortgage application. Since the work being done on a barn is extensive, you will require plenty of money to see the project through to the end.

You must be able to repay the mortgage over the specified duration for the application to be successful.

2. Credit History

A bad credit file reflects poorly on your chances of a successful mortgage application. If you have had a history of late or unpaid debts, the chances of securing a barn conversion mortgage will reduce.

But it isn’t impossible to get a mortgage in this situation so consider speaking to a specialist mortgage advisor who can advise you on your options.

3. Deposit

Barn conversion mortgage lenders, particularly when dealing with self-build mortgages, require a higher deposit amount than other residential properties.

As mentioned earlier, these are considered to be high-risk properties, which is why you may be required to pay about 25% of the property value as a deposit.

You may also be able to offer assets in the place of a deposit, provided that the asset is equal to or more than the deposit value.

4. Barn-Specific Conditions

Specialist lenders often require you to fulfil an additional set of criteria before providing you with the desired loan. For instance, lenders may not offer you a mortgage if the following is true about your property:

• The barn conversion is terraced or semi-detached
• You have opted for a modern barn construction
• Your barn conversion warranty runs out before the completion of the project

FAQs

1. Do I have to pay VAT on a barn conversion?

Yes, you need to pay VAT on a barn conversion but the rates may vary slightly. For a barn that is a Listed Property or has been lived in, you must pay the standard VAT rate. But if the barn conversion is on an agricultural property, you may be eligible for a 5% VAT reduction.

2. Is it possible to get a barn conversion mortgage with a bad credit score?

You can expect higher interest rates, deposit requirements and fewer lenders willing to give you a loan but it’s by no means impossible.

A specialist broker will be able to guide you through your options and this will give you the best chance of success when applying for a mortgage.

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

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.