Property Refurbishment Finance
Get the funds you need to profit from your next refurbishment project quickly and lock in the best deal with ABC Finance
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Property refurbishment is a flexible form of property finance that allows you to profit from the increase in value from refurbishment, extension or conversion.
Different options allow you to borrow against the end value, borrow towards the purchase and the full renovation cost or even 100% of the purchase price for below market value deals.
In this guide we break down what property refurbishment finance is, how it works and how much it costs.
Read on to find out more or get in touch for a personalised, written quote within 1 hour.
Property refurbishment finance explained
What is property refurbishment finance?
Property refurbishment loans are a form of short-term finance secured finance. It is designed for property investors, landlords and property developers who are looking to refurbish, or convert a property before letting or selling it.
If you purchase a property, extend it and refurbish the interior or exterior, the value could increase significantly.
We can fund all sorts of works, including title splits, conversions and multiple properties on one title.
Why not try our property refurbishment loan calculator?
How does refurbishment finance work?
It works by allowing you to borrow against equity to fund a property refurbishment.
Some lenders lend against the initial value only, with some offering up to 90%. Others will fund towards the purchase (at a slightly lower LTV) and 100% of the refurbishment costs.
There is some crossover with development exit finance, which is used to repay property development finance at the end of a project.
Property refurbishment loan rates & costs
What are typical property refurbishment finance rates?
Rates start at 0.39% for light refurbishments, with rates of 0.55-0.7% being common.
Heavy refurbishment finance tends to come with a slightly higher rate, with 0.75-0.95% is realistic.
LTV and rate are heavily linked, so a larger deposit or offering additional security can mean big savings on interest. The lowest rates are usually offered at 50% LTV and below.
What fees are charged when taking out finance for property refurbishment?
On top of the interest due, you’ll also be charged a number of fees, including:
Lender arrangement fee – This fee is charged by the lender for setting up the loan and is usually between 1-2% of the loan amount. Lower fees are usually reserved for larger loans. This fee can usually be added to the loan.
Broker fees – Most brokers charge fees for arranging property refurbishment loans, often 1-1.5% of the loan amount. We don’t charge a fee for our service.
Valuation fee – These fees are charged early in the process and can’t be added to the loan. As both the current and end value are important, and there is a requirement for comments on the work that will be done, this fee will be slightly higher than it would be for an equivalent residential or buy to let mortgage.
Legal fees – These fees are charged for the legal work involved in arranging the loan and you will be responsible for paying both your own and the lenders legal costs.
Key product features
Key Features
Max LTV
Up to 90%
Interest rate
From 0.39% per month
Charge types
1st, 2nd & 3rd considered
Term
1-36 months (maximum 12 months for regulated bridge loans)
Interest type
Added to the loan, deducted or serviced
Completion timescale
5 days – 3 weeks
Criteria
Residential, commercial property or land acceptable
Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
Minimum applicant age 18 years – no maximum age
Available in England, Scotland, Wales and Northern Ireland
Adverse credit accepted (on a case by case basis)
Loans from £25,000 with no maximum loan size
Where to get a bridging loan for property refurbishment
Should I use a property refurbishment finance broker or work with a broker directly?
The choice of whether to use a broker or approach a lender directly can be an important one.
There are a number of advantages of using a broker for this type of bridging finance, as it is such a specialist area. The application process can become complex if not handled well from the start, so help from an experienced broker can save a lot of hassle.
There is also a lot of difference in cost between lenders, and as property refurbishment finance lenders don’t tend to be household names, you could easily miss a big saving. A broker will be aware of exactly what’s happening in the market and should make sure you get the best bridging loan deal.
That said, some brokers charge expensive fees for their service (we don’t charge fees), so choosing to pay them will significantly add to your costs.
How does the property refurbishment finance application process work?
Once your application is submitted to a lender, they will usually assess your application and provide written terms within anything from 4-24 hours.
Once these have been issued, you will usually have to provide the information mentioned below.
The application can then be fully underwritten, and a surveyor appointed to produce a valuation report on the property.
Assuming everything goes well here, a formal offer is issued, and the loan can complete subject to completion of the legal work.
What information will I need to provide when applying for a property refurbishment loan?
When looking to take out a bridging loan to refurbish a property, the lender will usually require the following info:
- Details of your planned exit strategy.
- An application form giving details of your current circumstances.
- A breakdown of your assets & liabilities.
- Details of the property that you wish to purchase/refinance.
- Details of the works planned on the property, including the costs and timescales for completion.
- An estimate of the value of the property once works are complete.
- Details of your experience/any previous projects that you’ve undertaken.
Frequently asked questions
What type of properties can be refurbished?
We can offer loans to cover a range of situations including the following:
- Any residential property
- Semi-commercial
- Commercial
We can consider any property for property refurbishment as long as it is located in the UK.
How do lenders monitor refurbishment projects?
For each project that requires monitoring, the lender will appoint an independent monitoring surveyor (IMS). The monitoring surveyor will be a chartered surveyor who is there to check the quality and progress of the work undertaken and usually visits each time further funds are needed.
That said, you should consider your own personal circumstances or seek specialist advice if you’re unsure whether it’s a good idea to borrow money this way.
Does the amount of work I plan on doing matter?
Yes, the planned works will influence the lender chosen and potentially the rate charged. We will take this into account when looking for the most suitable product for you.
The key issue is whether your loan falls under light or heavy refurbishment. This will result in different criteria and products.
What exit strategies are acceptable to the lender?
The most common exit routes are sale of the property once works are complete, or refinance to a mortgage.
It’s important to ensure that your exit route is solid and reliable.
We always consider the exit route before looking to set up a new bridging loan for you. It’s important that you take this approach, whether or not you choose to work with us to arrange your finance.
Can I draw my money back out after I have added value to the property?
Some bridging lenders will allow you to take out additional borrowing once works are complete.
Where this is the case, the surveyor will generally need to confirm that the works are complete and are to the required standards.
Where the planned exit is refinance, it may work out cheaper to wait for the refinance to complete in order to take your funds out of the property.
