Six things you need to know before buying a historic home

Lisa Hassler knows historic homes inside and out. Not only is she a real estate agent specializing in historic homes in Cape Cod, Massachusetts, but she also has owned two of them herself. One of the things she loves about historic homes is how each generation puts its stamp on them by way of quirky decorations, odd changes to floor plans and additions. “You can see the patterns of life that may make no sense to you now but made sense to somebody 100 years ago,” she says.

The amount of work and money required to maintain a historic home can vary, depending on the condition it’s in. However, if you go in prepared, this labor of love can be less laborious. Here are six things to keep in mind before you make your home in a little slice of history.

1. Historic districts have their trade-offs

Living in a designated historic district might restrict what you can do to the exterior of your home, including your choices for such things as paint color and window type. Check with your local planning department.

Although such restrictions limit your options, “the great thing about designations and design restrictions is that they apply to everyone equally,” says Ginny Way, an architectural historian with the Minnesota Historical Society. Historic districts tend to have steady property values and an active neighborhood association invested in the quality of the area, she says.

Districts that are listed only on the National Register of Historic Places don’t restrict what you can do to your home, Way says, but areas on a state or local registry could have restrictions.

2. Historic preservation easements are binding

Setting up a historic preservation easement will protect the historic integrity of your home in perpetuity. You pay a qualified preservation organization or government agency to hold the easement, a legal tool that places restrictions on what can happen to the property and requires future owners to adhere to them. Your payment for an easement might qualify for a federal tax deduction.

Before purchasing a historic home, the National Trust for Historic Preservation recommends that you find out if an easement is already in place and, if so, what it entails and who holds it.

3. Maintaining a historic home’s integrity can get pricey

There’s a reason historic homes last: They tend to be structurally sound. “Houses that were built in the 1980s can be in worse condition than a 1600s house,” Hassler says. “It all depends on what work has been done to it over the centuries.” But if your home needs extensive repairs, costs can add up.

Holly McLear, a real estate agent in Newport, Rhode Island, recommends caution if you want to buy a historic home that needs a lot of work but you don’t have a steady income and a good amount of money saved up. You don’t want to be caught off guard by repair or replacement costs.

Some state historic preservation offices do offer grants or tax programs for homeowners. Wisconsin, for example, has a 20% homeowners tax credit that helps with repair and maintenance costs for the exterior of a registered property.

4. Getting financing and insurance can be difficult

There are several ways to finance your historic home purchase, even if you’re a first-time homebuyer. But some lenders might hesitate if the home needs extensive repairs, Hassler says.

While you may not be able to use a traditional loan backed by the U.S. Department of Housing and Urban Development, for instance, a private HUD Title 1 loan can go toward smaller repairs. And a loan called a 203k — also known as rehab mortgage insurance — can go toward the purchase and cost of rehabilitation. You could also take out a Fannie Mae HomeStyle Renovation mortgage for the same purpose.

Insurance companies may show reluctance to sell you a home insurance policy based on the assumption that replacement costs are higher for designated historic homes. But Way says this is not always the case, particularly if your home is only federally registered and therefore free of restrictions. You may have to spend some extra time shopping around for homeowners insurance.

5. Old homes can come with old problems

Although lenders usually don’t require a home inspection, getting one is a good idea before you make a commitment on any home. Paul Lusignan, a historian with the National Register of Historic Places, recommends that you find an inspector who has experience dealing with historic homes and the issues they present, such as the possible presence of lead paint (any home built before 1978 may have it, Hassler says) or asbestos.

6. Your modern-day wishes may not fit

Imposing your desire for a fully equipped kitchen or a master bathroom onto historic architecture may be a challenge. If they already exist and were added without the integrity of the historic value in mind, or if you plan on making additions without being careful, they could devalue your home.

Ask yourself: What are your goals in purchasing a historic home? What can you live without? How important is the home’s original character to you, and how will changes to that character affect the sale price?

One last thing

There’s always a need for people to save historic homes, says Way, adding that ownership of one isn’t limited to a specific type of person. She encourages homebuyers not to be afraid of maintaining a home with historic designation. “People have this notion that they’re going to be harder than new homes,” she says.  “While some are, some are not.”

Michael Burge is a staff writer at NerdWallet, a personal finance website. Email: mburge@nerdwallet.com.

This article was written by NerdWallet and was originally published by Redfin.