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JenniferPhotographyImaging/Getty Images May 25, 2022 Diane Costagliola is a contributing writer for Bankrate. Diane writes about homebuying, loans and personal finance. Bankrate senior editor for mortgages Bill McGuire has been writing and editing for more than four decades at major newspapers, magazines and websites. Bankrate logo The Bankrate promise
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What is a historic home
The National Register of Historic Places evaluates properties based on age, integrity and significance. Properties can include private homes, commercial buildings, landmarks and districts that meet the following criteria: Age: The property is at least 50 years old (with an exception if the property has highly important significance). Integrity: The property largely looks the way it did at the time of construction, and retains a high degree of its original character and historic material. Significance: The property is connected to historic events, people or developments that are important to history. This can include architectural history, landscape history or engineering achievements. Most jurisdiction happens at a local level, not a federal one; there are no restrictions associated with being listed in the National Register of Historic Places. Make sure to review the municipal code of your city or town and check with the state or local preservation office. As Ryan Arvay, Historic Properties Coordinator of Historic Savannah Foundation, notes: “All preservation is local.” Here’s an overview of things you may want to consider before you buy a historic home, including guidelines imposed on the property, financial considerations and your own needs.
Determine if a historic home is right for you
Unlike other home buying experiences, falling in love with a historic home because of location, price and charm does not mean it is the best purchase for you. Ken Lyon, Associate City Planner and Historic Preservation Officer in Palm Springs, California, reminds potential buyers that a buyer with no interest in learning the history of the community, or someone who wants to modernize an older home, should maybe look elsewhere. “There is a responsibility in owning a historically designated home in terms of maintenance and upkeep, and honoring aspects of the house that make it significant.” Buying a historic home may be right for you if you want to
Preserve the historic home s character
Small rooms, carved newel posts and undulating wood floors can all be part of a historic’s home charm and should be treated with respect. Arvay says that “the best buyer for a historic home is going to be someone who appreciates the history of the home, the architecture and the craftsmanship.” Follow specific guidelines
Arvay and Lyon both stress the importance of familiarizing yourself with local jurisdiction as some towns or preservation offices will have specific guidelines that dictate the modifications you can make to the home. Review boards may look at everything from exterior design and architectural detail changes to a home’s color, siding material, window style, roofing and more. A historic district in Long Beach, California for example encourages the preservation of distinctive features, finishes, and construction techniques that are important to a building’s character and any proposed changes must be consistent with the architectural period of the building to get approved. Share your home with others
One thing that makes a historic home special is that it is part of a greater story. “Owning a historic home should be about pride of ownership,” explains Lyon. “People quickly get lost in the financial incentives, but loving the place you live, and being proud of it, is immeasurable. Share that with others and use your home for philanthropic good in the form of fundraisers or tours.” Buying a historic home may not be right for you if you want to
Treat it like a fixer-upper that you can renovate
“If you love a modern aesthetic and open floor plans, please don’t buy one,” says Arvay. “You might find yourself stymied by requirements. Historic homes are finite. Don’t strip it inside when you could buy or build a new home.” Since these homes are part of the local history, Arvay believes that a responsible owner should repair when possible and only replace “when necessary and in kind.” Modify your home without restrictions
Depending on your location, there could be a city ordinance, for example, saying that you must restore wood sash windows instead of replacing them—don’t even think about adding new picture windows, sliding doors or skylights. Michelle Drum, broker associate for Gustave White Sotheby’s International Realty in Newport, Rhode Island, has had buyers who “want to know how to add modern amenities such as central air conditioning and if opening walls to create an open floor plan is possible.” While some jurisdictions can’t dictate what happens once you cross the threshold, Lyon adds that there is an added responsibility with “proper maintenance and respecting the historic characteristics of the place.” Spend more of your time and money on other things
Owning a historic home doesn’t have to take over your life, but it will cost you time and money. The cost of remodeling, lumber, materials and even labor has skyrocketed amid supply shortages and labor shortages caused by the pandemic. In addition, Drum explains you may need board approval for certain modifications, “if you have a time restraint, often an architect or lawyer needs to get involved and this costs money.” Also, local jurisdiction may require that you maintain the exterior of your home on a more rigid schedule than you’d like.
Financial considerations of buying a historic home
From overcoming structural issues to federal tax breaks, there are a number of financial considerations to review before buying a historic home. Benefits
There are both federal and state tax credits that may benefit historic homeowners. Lyon recommends that buyers do their research and “take advantage of any and all financial incentives” such as tax reduction programs or low-interest home improvement loans for historic properties. According to the Heritage Consulting Group, , 37 states offer tax incentives for the rehabilitation of historic properties. Several states offer a 25 percent additional credit for homeowners, and some states give you credit if the property is income producing. New York offers an additional 25 percent if the project is for a barn, while South Carolina offers an additional 25 percent if you are rehabilitating a mill. You should check with your state’s historic preservation office for more details. There is also the federal Historic Rehabilitation Tax Credit (HTC) which is a credit for 20 percent of qualifying costs on a historic project. The program changed with the Tax Cuts and Jobs Act in 2017, and now the credit must be taken over five years. You should speak with a qualified tax credit consultant for more details. The best financial benefit of all, however, may be long-term. Historic homes in a popular location will result in a higher premium. With a limited number of antique homes, purchasing one and maintaining it may provide a great return on your investment. Challenges
Depending on the home’s condition, maintenance and repairs could cost more than the average home. “With an old house, there is always going to be something,” says Arvay, “but you just have to know that.” According to statistics from the National Trust for Historic Preservation, for some repair projects, labor costs could be high due to the need to hire skilled craftsmen with experience repairing plaster, masonry and the like. Arvay suggests you include a 20 percent contingency in your overall budget for unforeseen issues. “When undertaking a massive rehab project, there’s always something that arises.” The property appraisal may also be more complex with a historic home and include looking at whether the home is stigmatized. A house connected to a beloved historical figure will have a higher market value than one connected with someone infamous. “A ‘haunted’ house can be a trophy property as there can be a market for homes with a bad reputation,” explains Michael Miller, real estate appraiser with ABC Real Estate Services in Greensboro, North Carolina.
How to get a mortgage loan for a historic home
Financing a historic home can also present some challenges, so it is important to talk to your lender. Certain banks may require additional loan guarantees for older homes. If you are applying for a VA or FHA loan, make sure that the home meets their specified criteria—you might run into a problem if the home needs extensive repairs or has a structural issue. That being said, you may qualify for two FHA programs that can help fund repairs for historic homes. The programs include the and the Title 1 Property Improvement loan. With a 203(K) loan, you can finance up to $35,000 for repairs or home improvements and your project must cost at least $5,000. Repairs must be completed within six months. With a Title 1 loan, you can borrow an unsecured amount of $7,500 for smaller repairs; the maximum amount you can borrow for a single family home is $25,000. Bottom line
Buying a home is a big purchase, no matter the age. There’s a lot more to consider, however, when buying a historic home. You’ll want to educate yourself on the property, learn about any restrictions or guidelines in place, and really examine the house’s structure and maintenance needs as well as your budget. But for the right person, all the challenges can be a fun project and a true labor of love. “There is nothing more enriching than owning an historic home, peeling back the fabric and understanding how it is constructed and knowing that you are maintaining your home for generations to come.” — Michelle Drum SHARE: Diane Costagliola is a contributing writer for Bankrate. Diane writes about homebuying, loans and personal finance. Bankrate senior editor for mortgages Bill McGuire has been writing and editing for more than four decades at major newspapers, magazines and websites. Related Articles