Mortgage broker Mount Hawthorn

Buying a house you already intend to renovate

The typical Mount Hawthorn house began as a two or three bedroom interwar bungalow on a narrow lot with a laneway behind it. After twenty years of steady renovation you are usually choosing between one that has been done and one that has not, at prices that reflect the difference.

A lender assesses the purchase, not the plan. Borrow to your ceiling on an unrenovated cottage and the work you bought it for has nowhere to come from, which is the most common way a Mount Hawthorn purchase comes unstuck.

1. 1

   Work out the whole number, not the purchase number

   Your capacity has to carry the price, the duty and the work you are planning. Getting that figure first changes which houses you should be looking at on a Saturday.

2. 2

   Have the work roughly costed before you bid

   A builder's ballpark on a rear extension is enough at this stage. The point is knowing whether the plan fits inside what a lender will lend, not pricing it to the dollar.

3. 3

   Decide how the work gets funded before settlement

   Renovating from redraw or an offset is a different structure to a staged construction facility. Both are easier to set up at the start than to bolt on eighteen months later.

4. 4

   Hold a buffer that is not inside the loan

   Houses of this age keep their problems hidden until the walls are open. Money held outside the facility is what stops a renovation stalling half finished.

None of that means the renovation has to be settled before you buy. It means we should know it is coming, because it decides the lender, the loan structure and how much of your deposit should stay untouched.

Character controls, laneways and the freeway edge

Much of the suburb sits inside the City of Vincent's character controls, so the demolish-and-start-again option that other Perth suburbs take for granted is usually not available. What that changes for finance is the evidence a valuer works from, because an extension is valued as-if-complete rather than as a new house.

Mount Hawthorn happens to have an unusual amount of that evidence. Where a renovated house in a less-worked suburb has little to be compared against, here a valuer has streets full of the same project already finished, which tends to make an as-if-complete figure easier to support.

The laneways behind many blocks are the other local feature worth understanding. They give some lots the rear access a second dwelling would need, though what the lot can actually take is a planning answer and it comes before any lending one.

• The character controls, which decide whether your project is an extension or a rebuild
• Approvals for work done by a previous owner, often missing on houses altered decades ago
• Rear laneway access, which changes what the back of the lot could become
• Proximity to the Mitchell Freeway on the western streets, which some valuers reflect in the figure
• Whether an existing extension was finished and approved, since unfinished work reads as a cost

Noise conditions can also attach to new work on those streets through the planning approval. That is a cost your builder should be pricing at the contract stage rather than a surprise partway through the draws.

What Mount Hawthorn clients come to us for

The most common file here is not a purchase at all. It is an owner who bought some years ago, has outgrown the house rather than the suburb, and wants to know what the equity in it will fund.

Those conversations tend to end in one of two places. An equity release against the current value where the work is modest, or a construction facility drawn down in stages where it is a proper extension, and the line between them is roughly whether a builder is running the job under a fixed-price contract.

The other steady stream is the Scarborough Beach Road strip and the northern end of Oxford Street. Small food businesses, cafés and consulting rooms in tenancies that change hands regularly, where the lending leans on the lease, the fit-out and the trading history rather than on bricks.

• Home loans for families buying interwar stock they intend to extend
• Refinancing and equity release to fund a renovation on a house you are staying in
• Construction finance for rear extensions and second storeys behind a retained frontage
• Development finance where a laneway lot supports grouped dwellings
• Commercial loans for tenancies and premises along the Scarborough Beach Road strip

The office is on Cambridge Street in West Leederville, a few minutes down Oxford Street, so meeting in person is easy for anyone here who wants to. Plenty of files never need it, and that is fine too.