How to Pay for Historic Home Renovations
It is very attractive to buy and repair a vintage home, like an early 20th century Victorian house or a 19th century Tudor.
However, it also requires a lot of work and money – especially when converting a house that has been designated as "historic" property.
Fortunately, there are historic home restoration grants, loans, and tax incentives that you might be able to take advantage of.
Some are more difficult to find and qualify than others, but by doing your homework you should be able to connect to valuable resources that could save you thousands.
Check your eligibility to buy a home (April 21, 2021).
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Cost of renovating historic homes
Historic houses can have a lot of prestige. They are a rare holdover from bygone craftsmanship, architectural styles, and vintage materials that are no longer mass-produced.
An old house can also be valued for other reasons, such as: B. because it is the home of a famous person or the location of a significant event that took place decades ago.
Hence, historic homes can be much more expensive to buy and renovate than what you would pay for a typical existing home.
To offset these costs, you can qualify for grants, loans, and / or tax credits that can be used to cover the purchase of a home and, if necessary, the cost of restoring your new home.
Historic home grants
Unfortunately, most historic home grants are only available to nonprofits and public real estate / groups.
As a private owner of a historic home, you may have local, state, or national grants from a variety of sources, including philanthropic groups.
"Local, state, and federal governments all have their own scholarship programs," said Jon Wiest, owner of Ripped Jeans Construction.
“For example, in my town of Aurora, Illinois, the community runs a grant program for homeowners in their historic neighborhoods to improve the exterior of their homes – for example, to improve their homes. B. repaint mortar, replace siding and paint.
"These grants range from $ 5,000 to $ 20,000," continues Wiest. "There is a competitive application and approval process and homeowners must submit a detailed scope of related work and several competitive bids to be eligible."
To locate grants in your area, first obtain additional information from a nearby National Trust for Historic Preservation office or your State Historic Preservation Office. Also visit this PreservationDirectory.com website for links to various grant programs.
Grant requirements vary widely by program, including rules on how, where, and when the funds can be used.
Historic home renovation loan
Of course, grants aren't the only source of funding for historic home buyers. You can also take out a home renovation loan that will help restore the property and make it habitable.
One of the most popular options is an FHA 203k rehab loan.
This federal government-sponsored mortgage program bundles your primary mortgage and home renovation costs into one loan. The interest rate can be fixed or adjustable, your down payment can only be 3.5%, and you usually need a credit score of around 620.
The downside to the FHA's 203,000 program is that buyers must get mortgage insurance. However, the same applies to most mortgages with a down payment of less than 20 percent.
Buyers who can save 20% or more may prefer Fannie Mae's HomeStyle Renovation loan or Freddie Mac's CHOICERenovation.
These conventional loans are similar to the 203k program; With them you can bundle the purchase price and the renovation work in a single loan. However, all you need is private mortgage insurance (PMI) until your equity reaches 20% of your home's value – and you can avoid PMI altogether by lowering 20%.
Another option is a Title 1 loan supported by the Department of Housing and Urban Development (HUD). This loan allows you to borrow an unsecured amount of $ 7,500 for small repairs or a maximum of $ 25,000.
Check eligibility for a home renovation loan (April 21, 2021).
Financing options for home ownership
If you have a primary residence and are purchasing the historic home as an investment or a second home, you may have other loan options.
You may want to take the equity of your current home and use those borrowed funds to fund a remodeling of your historic home. If so, please note:
Alternatively, you can consider an unsecured personal loan that doesn't require you to use your primary residence as collateral.
Personal loans can be obtained much faster than other types of loans. While the interest rate can be fixed or floating, the interest rate is often much higher than that of home finance. The better your credit score, the better your chance of getting a lower rate.
Review your funding options (April 21, 2021)
Tax breaks for historic houses
Good news: your historic home purchase and rehab could result in robust tax savings.
Most states offer tax incentives for renovating historic properties. In fact, some states give homeowners an additional 25% loan while others give a loan if the property reduces income.
Click here to find tax incentives and programs available in your state.
One of the most generous tax credits you may be eligible for is a federal Historic Rehabilitation Tax Credit (HTC), which provides a 20% credit on the qualifying cost of a Historic Rehabilitation Home that results in an income-generating rental.
Another possible tax incentive is the 10% Rehabilitation Credit, which generates a 10% tax break based on renovation costs that preserve the original character of your historic structure. To qualify, the property must have been built before 1936 and be used to house your business.
You may also be able to have your property taxes freeze by working closely with your local or state heritage protection agency.
Alternatively, it may be possible to donate part of your land or historic home to a nonprofit conservation association, which can result in a significant tax deduction.
Finally, you may be able to qualify for tax savings through a relief that is an agreement between you and a history preservation company. If you agree to remodel and maintain the historic character of an older home, you may be able to qualify for lower property, income, and / or estate taxes.
Contact the local authorities and your tax advisor to find out what benefits you may be eligible for. We do not give any tax advice on this website. These are simply options that may be available depending on your situation.
Potential challenges when renovating historic homes
Regardless of the funding aid you may qualify for, it is important to note that there may be restrictions on the type of renovation work you can do.
"Don't be surprised if local laws have specific rules and guidelines. For example, owners may not be allowed to change or expand their home without the city's approval," said Matt Bigach, co-founder of real estate investment company Nexus Homebuyers.
"Given that most historic homes are at least several decades old," keep in mind that they can be a lot of work, "Bigach adds.
"If not stored properly, it can cause electrical problems, water damage or structural problems. So it is important that a trusted and experienced home inspector thoroughly appraises the property before buying it."
"It is important that a trusted and experienced home inspector thoroughly appraise the property prior to purchasing it." –Matt Bigach, co-founder of Nexus Homebuyers
John Kilpatrick, managing director of Greenfield Advisors, says one of the biggest challenges in renovating a historic home is sourcing original building materials or suitable substitutes.
"Let's say you were renovating a house that was built in the 1860s, but you didn't know the windows were all replaced in 1910. The way the windows were designed and made in 1910 would not be for an 1860 structure authentic, "he warns.
"For a large historic home renovation project, you almost certainly need advice from a qualified heritage architect," says Kilpatrick.
Other challenges? Any home built before the mid-1970s will have leaded paint that will either need to be removed or encapsulated. Also keep in mind that before the 1950s, asbestos was widely used as an insulating material that needs to be removed.
“And historic homes likely have lead pipelines that need to be completely removed. Additionally, electrical wiring from decades ago can be a safety hazard and warrant replacement, ”adds Kilpatrick.
In general, every time the interior of a historic building is renovated, the update is brought up to date.
"This often involves digging in walls and floors and can be a fairly invasive process," says Wiest.
“Old houses may have sloping floors, cracked plaster from sloping foundations, or rotted support posts. Some houses even require the employment of an engineer to solve structural problems. "
If your heart is set on a beautiful old house, these precautions shouldn't put you off.
However, you should have the property thoroughly inspected and make sure you fully understand the scope and cost of the repairs required before signing up.
How to get your property listed as a Historic Home
If you already own a vintage home and you have reason to believe it is of historic importance, you may be able to get your home listed as "Historic". This can help you qualify for some of the grant programs and tax benefits listed above.
According to Kilpatrick, you typically need to get your property officially approved through a process coordinated by your State Historic Preservation Office in order for it to be classified as a Historic Home.
You can also consult the National Register of Historic Places, which analyzes and labels historical properties based on age, significance, and integrity.
FAQ on historic home renovations
Can you renovate a historic home?
Yes, you can renovate a historically designated house structurally and in other ways. However, you will likely need to follow the rules and requirements set by your municipality and / or state. To qualify for grants, loans, and potential tax breaks, you may also need to meet the requirements and restrictions associated with renovating your historic home.
Can I remodel a historic house?
You may be allowed to aesthetically remodel a historic house you have purchased. However, there will likely be local guidelines for the types of upgrades you can make, building materials you can use, and much more. Don't expect to get a complete makeover in modern styles.
How much does it cost to restore a historic house?
The cost of restoring or renovating a historic home can vary widely. “However, renovating a historic house is almost always more expensive than a comparable non-historic house. The extra planning, design, and labor can be significant, which translates directly into higher costs for homeowners, ”says Jon Wiest of Ripped Jeans Construction.
How can I get a grant to repair my historic home?
You may be able to identify local, state, or national grants from a variety of sources, including philanthropic organizations. To locate grants in your area, first obtain additional information from a nearby National Trust for Historic Preservation office or your State Historic Preservation Office.
How old does a house have to be to be considered historic?
In order to be classified as historic property, the residence must usually be at least 50 years old.
Is it worth buying a historic home?
A historic home can be a good investment if you do your homework and restore it properly. Property can increase resale value significantly when well maintained, especially when valued for association with an important historical figure or event.
Check your eligibility for a home improvement loan
Historic house names and grant programs are run at the local level. So check with your state to see if you may be eligible for any available grants.
If you already own a historic home or want to buy a fixer upper, you can also find home renovation loans from many major lenders. Today's prices are low, which makes rehab funding more affordable for homeowners and home buyers.
Check your new tariff (April 21, 2021)