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Financial planning for those hoping to o...

19 February 2024

Financial planning for those hoping to own a listed property

By Vikki Rushbrook Insurance Advisor

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Buying a listed property can be a dream come true. It’s a chance to own a piece of history with unique architectural features that newer homes can’t match. But it’s also a significant financial commitment, requiring careful planning and consideration.

The process of purchasing a listed property is different from buying a regular home. It’s not just about securing a mortgage; there are additional costs and considerations that potential buyers need to be aware of.

In this blog, we’ll investigate the financial planning required for buying a listed property. You’ll benefit from the knowledge and confidence needed to navigate this complex process. Whether you’re a first-time buyer or an experienced property investor, our tips and insights will prove invaluable. So, let’s begin your journey to owning a piece of history.

Understanding listed properties

Listed properties can seem right out of a fairy tale – beautiful homes with history. But it’s crucial to grasp what buying a listed property entails. Unlike regular homes, listed properties come under the umbrella of legal protections. This means they’re buildings with historical or architectural significance. And they can’t be altered or demolished without specific permissions.

For the potential buyer, these restrictions may pose challenges. Plans for renovation or extensions require approval. Often, this process is lengthy and could prove expensive. Importantly, owners of listed properties carry responsibility for the maintenance and upkeep of the building. It isn’t just about aesthetics; it’s about preserving cultural heritage.

Every buyer should also know that getting a mortgage for a listed property tends to be difficult because financial institutions perceive these properties as greater risk. Insurance can also be higher compared to regular properties. Since these properties are often older, they may have underlying issues that require extensive repairs.

The beauty and charm of a listed property is irreplaceable. Yet, it’s essential to weigh up these factors when carrying out any financial planning. The road towards owning a listed property may have more bends and stop signs along the way, but the final destination can be well worth the journey. That’s why due diligence and accurate planning are essential.

Start by assessing your financial situation

Once the challenges of buying a listed property are clear, the next logical step is an honest assessment of one’s financial situation. This goes beyond a simple credit score analysis and requires a detailed look at income, savings, expenditure, and future financial commitments.

If you’re in the market for a listed property, you must consider the immediate financial implications of buying one and any future costs incurred due to the maintenance, repair, and insurance of these unique structures.

Therefore, it’s essential to carefully calculate the affordability level before purchasing. Unforeseen financial shocks, such as sudden repairs or loft conversions, can significantly and rapidly drain resources.

These costs can escalate quickly, putting financial strain on the owners.

We therefore advise that you create a detailed budget plan with all potential expenses. This plan should consider:

The initial cost of the property
Mortgage repayments
Continual maintenance charges specific to listed properties
Insurance premiums
Future renovation costs

For prospective buyers serious about purchasing a listed property, it’s vital to consult a professional mortgage adviser who possesses the experience with these specific properties. They can offer invaluable advice and guidance, helping the buyer make an informed and intelligent decision. Be aware that mortgages for listed properties often come with specific conditions and higher interest rates, which must be factored into the overall financial plan.

Remember, while investing in a listed property may require more work upfront, it can lead to a dream home filled with character and charm. A smart financial plan is a solid foundation leading to owning a stunning slice of history.

Setting your budget

A critical component in this financial planning process is budget setting. Without a firm grasp of your financial position, it’s easier to spiral into debt or even lose the property. Hence, before venturing into the listed property market, it’s crucial to understand all predictable expenses thoroughly.

Sometimes, prospective buyers overlook minor expenses because they seem insignificant. However, small costs can accumulate to form substantial amounts over time. An intelligent budget covers every possible expense. It includes mortgage repayments or upfront costs and those expenses that may feel trivial – like maintenance charges or insurance premiums.

While setting a budget, one crucial factor is the unpredictability of repairs and refurbishments in a listed property. The unique structures and architectural features that lend these properties charm can also lead to costly maintenance. Hence, the budget must also set aside funds for unexpected repair and renovation costs.

Here’s where hiring a professional mortgage adviser for guidance can prove invaluable. They’re proficient in dealing with such complexities and provide invaluable guidance on budgeting for these unexpected costs.

This emphasises the importance of careful and strategic financial planning for purchasing a listed property. Always maintain sight of this necessity, as it forms the solid foundation for this tremendous financial undertaking.

Saving for a deposit

Starting their journey on the purchase of a listed property, it’s fundamental for prospective property owners to focus on saving for a deposit. This initial financial commitment is often a significant portion of the overall property price. Typically, lenders require deposits between 10 and 15 per cent of the property’s value. However, this figure might be higher for listed properties due to their unique and sometimes complex nature.

This needs to be factored into costs and outgoings alongside the mortgage repayments, maintenance charges, insurance premiums, and potential refurbishment costs. Each element plays a critical role in shaping the complete financial picture of buying a listed property.

Financing options for listed properties

Once a budget is set and the initial deposit saved, it’s time to consider various financing possibilities. As with any property, a significant part of the resources needed for purchasing comes from loans. But, with a difference – getting a mortgage for listed properties may be more challenging.

One way to circumnavigate this issue is by exploring options with niche lenders. While traditional banks may hesitate, specialist lenders are more willing to assist. They are accustomed to dealing with unique setups, like listed properties, and understand the inherent complexities.

Also, a prospective buyer could explore help-to-buy schemes. These government-sponsored initiatives offer equity loans to aid property purchases, often even those with a grade I or II listed status.

Another route for financing is through renovation grants. Due to their historical importance, listed properties often qualify for renovation aid. Grants from institutions, such as Historic England, may help offset the high refurbishment costs that usually come with listed properties. But remember, it’s vital to crosscheck the grant’s eligibility criteria with the property’s status and condition.

Securing finance for a listed property can be both time-consuming and frustrating. But, with the proper guidance and careful planning, it’s achievable.

Additional costs and considerations

Appreciating the full breadth of expenses related to buying a listed property is imperative. Beyond mortgage repayments and upfront costs, there are many additional costs to budget for.

Purchasers should anticipate legal fees, survey costs, and state dues such as Stamp Duty Land Tax. Legal costs can vary but setting aside around £850-£1,500 plus VAT is typical. Meanwhile, survey costs start from around £400.However, a specialist survey may be necessary for a listed property, pushing costs up to £1,500 or more.

The Stamp Duty Land Tax varies depending upon the property’s price. For example, for properties priced over £125,000, the buyer must pay a two per cent tax on the portion between £125,001 and £250,000. The tax then scales upwards to 12 per cent on portions over £1.5 million.

Property price	Stamp duty rate
£0 to £125,000	0 %
£125,001 to £250,000	2 %
£250,001 to £925,000	5 %
Over £1.5 million 12%	12 %

A listed property often requires specialist work, which may be more expensive than routine maintenance. Hence, it’s advisable to have an allowance for unforeseen extra costs. Budgeting for these additional costs ensures that the buyer is aware, fortifying their financial planning.

Working with professionals

To aid in the financial planning for purchasing a listed property, working with specialists is essential. They provide the knowledge and experience to steer a potential homeowner in the right direction and keep unwanted surprises at bay. Partnering with professionals such as mortgage advisers, surveyors, and solicitors can ensure a well-rounded understanding of financial planning.

Mortgages for listed properties

Mortgage advisors stand out as the linchpin in this professional team. They offer insights into the mortgage process, illuminate the best deals, and explain any accompanying terms and conditions. Their advice can make the difference in securing a mortgage with favourable interest rates, leading to significant savings in the long run. They also advise on the best ways to save for unexpected costs associated with listed properties.

Surveys

Usually, an in-depth survey is necessary when buying a listed property. Chartered surveyors can conduct such a survey, and their detailed report provides a clear idea of the property’s condition. This effectively prevents unfortunate outcomes and events, and allows for more accurate budgeting.

Insurance

Your historic home needs insurance and, in this case, it’s not something you can or should just simply buy “off the shelf”. While a comparison website may offer you a quote, you run the risk of not being properly insured or underinsured. Along with the nuances that make your home special come many insurance implications and unless you work with an insurance broker to place your cover, these may not be picked up in your policy, which could in the case of a claim cause your insurance to be deemed invalid. Which in some cases not only means that your insurance is null and void, but you may end up paying out more than you thought possible.

A listed home insurance policy may cost more than the average home insurance policy, but that’s down to the uniqueness of the historic home. For example, if a new build were to burn down, the owner is not legally obligated to rebuild as the property stood previously. But with a listed property… you are. That could mean a whole selection of specialist materials and trades people that not only cost more money but would almost certainly take more time! This means you need to be insured to a very different level when your property is listed.

The most efficient way to ensure your home is properly insured is to work with a specialist broker that truly understands listed properties, the quirks of them, and the true value when it comes to insurance. Not only will your broker ensure your policy is up to scratch, but they’ll also be able to search the market for you to be able to secure the most preferential rate.

The legal bits

Finally, it’s advisable to consider solicitors proficient in property law. They’ll assist in discovering unforeseen legal fees that apply when buying a listed property. Their input can warn a potential homeowner about caveats and regulations pertinent to the property.

Considering the unpredictable nature of purchasing a listed property, having a team of experienced professionals helps mitigate risks and encourages successful homeownership. Working with specialists not only aids in budgeting for predictable and unexpected costs but also in understanding the full financial implications of this significant financial step.

Closing advice

Purchasing a listed property isn’t a decision to be taken lightly. You must understand the unique challenges and duties that come with it. From securing a mortgage to meeting insurance costs, it’s a journey that requires careful financial planning. Setting a realistic budget is critical – factoring in not just predictable expenses but also unforeseen costs. Working with experts is your vital tool to managing this complex process and mitigating the risks on the journey to listed property ownership.

Government schemes can offer some relief but seeking professional advice to understand these options is a critical part of the process. Remember, buying a listed property is more than an investment; it’s a commitment to preserving a piece of history. So, plan wisely, budget carefully and seek expert advice to make this dream a reality.

Frequently asked questions

What are some significant challenges of buying a listed property?

Purchasing a listed property comes with unique challenges, including obtaining permissions for alterations or demolitions, difficulties securing a mortgage, and higher insurance costs. Understanding these elements is critical for potential buyers.

Why is budgeting crucial when buying a listed property?

Budgeting is important because buying a listed property goes beyond the cost of the property itself. It would help to prepare for predictable expenses such as mortgage repayments, upfront costs, maintenance charges, and insurance premiums.

Are there any unexpected costs when buying a listed property?

Yes, a listed property entails unpredictable costs like repair and refurbishment expenses. It’s highly advised to set aside a fund for such circumstances.

How can professional advice help when buying a listed property?

Mortgage advisers, surveyors, and solicitors can aid in financial planning and help mitigate risks associated with purchasing a listed property. They are essential in navigating the intricacies of a listed property purchase.

Are there government schemes to aid in purchasing a listed property?

Government schemes like the Help to Buy Equity Loan, Shared Ownership, and Stamp Duty Land Tax relief for first-time buyers can reduce costs. Professional advice is recommended to better understand and apply for these schemes.