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Historic Home Living: What You Can and Can’t Change

Updating a piece of American history comes with conditions.

Whether you live in a historic home or are thinking about buying one, this elevated homeownership experience has benefits both visible and intangible. There are funding sources available through state, federal and private institutions to preserve historic houses and structures. Ultimately, your vision must agree with the type and extent of improvements this funding covers — or it will eventually be time to look for another home.

For example, if your family is growing and the house needs to grow along with it, most historic homes would not be eligible for an addition. However, if your rehab focus is safety or aesthetic upgrades that won’t negatively affect the look and feel of the property, you’ll have more renovation options to consider.

How do you know a historic home is really historic?

There are two sure-fire ways a homebuyer can find out if a property is actually historic:

National Register of Historic Places — Recognizing more than 90,000 properties for their place in American history, this registry was established as part of the National Historic Preservation Act of 1966. It’s maintained and updated by the National Park Service. Recognition is based on time-relevant qualities of architecture, archeology, and art, among other defining characteristics of culture. And with few exceptions, a historically significant home must be at least 50 years old.

Town Hall — Though it’s an official federal program, the National Register of Historic Places does not include every home in America with historical importance. U.S. towns and cities have different ideas of what it means to be “historically significant,” so local ordinances and zoning regulations determine the property’s status, whether it’s on the National Register or not. Check with your municipal offices to find out if there are restrictions on that stately Georgian beauty or intriguing Pueblo Revival adobe that caught your eye.

What kind of renovations to historic houses are allowed?

First time homebuyers fixing up their historic home thanks to their rehab home loan

Homes on the National Register aren’t protected by the National Register, so in the eyes of the U.S. government, if you’re not a federal owner of the property, you can do whatever you want to it — including tearing it down.

Realistically, if your house is on the National Register or in a recognized historic district, your municipality will have conditions on what updates you can make. This is where the restrictions on additions noted previously would come into play. In general, adding square footage to historically significant properties is going to be difficult. Other limitations may include changes to windows and shutters, which are often defining historical features, and exterior paint, among other aesthetic modifications.

Homes on the National Register are eligible to receive funds from the National Historic Preservation Fund, overseen by the U.S. Secretary of the Interior. This pool of federal money provides project grants for homeowners to improve historic homes, and it offers incentives for first-time homebuyers to purchase and renovate old houses. As defined by the Secretary of the Interior’s Standards for the Treatment of Historic Properties, four types of renovation are allowed if you receive funding through the Preservation Fund:

  • Preservation focuses on the maintenance and repair of existing historic materials and retention of a property's form as it has evolved over time.
  • Rehabilitation acknowledges the need to alter or add to a historic property to meet continuing or changing uses while retaining the property's historic character.
  • Restoration depicts a property at a particular period of time in its history, while removing evidence of other periods.
  • Reconstruction re-creates vanished or non-surviving portions of a property for interpretive purposes.

What types of home loans can help you buy a historic home?

If you’re in the housing market and love the look of a Victorian home for sale in the historic district of town, you may have a number of purchase options and incentives you wouldn’t otherwise enjoy with a regular property. Though there are no technical restrictions to buying a historic home in terms of loan product, mortgage underwriting can be more rigorous because the general assumption is the property will require greater upkeep and maintenance, and be less energy efficient, resulting in higher monthly costs. Because of this reality, conventional 15-year and 30-year home loans are typically the way to go. A historic home is less likely to fit the requirements for products featuring $0 or low down payments — such as USDA, FHA, and VA loans.

Tax credits, grants, and low-interest loans.

Because historic homes impose a higher economic burden on homeowners, a number of incentives and credits are available to offset these costs:

State tax credits — According to the National Trust for Historic Preservation, 35 states have tax incentives for rehabbing a historic home. Some states provide extra incentives for certain types of properties, such barns, mills, and those that produce income. (Consult your tax advisor for details.)

Federal tax credits — You may have heard of the Historic Rehabilitation Tax Credit, but it is not for owner-occupied residential properties. However, historic property owners can create preservation easements to protect their property against development, and may realize federal income tax deductions based on the donation of an easement. Easements are complex legal entities requiring expert legal and tax advice.

Rehab grants and low-interest loans — Your state’s Historic Preservation Office is an excellent resource for information about grant opportunities and low-interest loans.

Your qualified loan originator will help you navigate the loan programs that make the most financial sense for your purchase and renovation plans. Contact us if you’re ready to make a piece of history your home!