0116 464 5544Refurb Bridging Finance
If you are a property investor considering upgrades or renovations for one or more properties, you may find a refurbishment bridging loan to be on of the best solutions.
Refurbishment bridging loans are popular options for investors looking to capitalise on a great deal who lack the additional funds required to cover the renovations. Refurbishment loans can be used solely to fund renovation and improvement projects or to cover the costs of a property outright and the subsequent renovation bill.
What is a refurbishment bridging loan?
Refurbishment bridging loans, also referred to as refurbishment finance, are specialist loans issued to cover the costs of property refurbishments. There are two primary types of refurbishment bridging loans available, known as ‘light’ refurbishment loans and ‘heavy’ refurbishment loans. The nature and scale of your requirements will determine which of the two solutions is most appropriate for your needs.
Though not always the case, refurbishment loans are paid out in two stages. The first payment is calculated based on the purchase price of the property, after which the second payment is transferred upon completion of the refurbishments. The value of the property with a refurbishment bridging loan relates to its projected value when the refurbishments have been carried out.
Let’s look at a simple example of what a refurbishment loan would look like in reality:
- A property is bought for £100,000.
- The cost to refurbish the property is £20,000.
- The estimated value of the property after refurbishment is £150,000.
- Therefore, you will be able to apply for a refurbishment loan for £105,000 (70% LTV).
Each lender will have their own set of terms and criteria for eligibility for applicants to refurbishment finance. As with all bridging loan applications, you can expect extensive credit history checks to be carried out as part of the process.
What are light refurbishment bridging loans?
Light refurbishment refers to upgrades made to a property that do not require any major structural changes or planning permissions. It is, however, important to check with the lender what they consider ‘light’ as this may vary from one lender to another.
Examples of light refurbishment:
- Installing a new bathroom
- Installing a new kitchen
- Electrical re-wiring
- Replacing old windows and doors with new
- New central heating system
- General decorating and cosmetic upgrades
- Repurposing rooms
- Any upgrade that is non-structural
Even if the upgrade involves all the above alterations, it will still be considered ‘light’ refurbishment due to the fact that no major changes are being undertaken and no permissions are required.
What is a heavy refurbishment bridging loan?
Refurbishment that involves structural changes and planning permission is typically referred to as heavy refurbishment. This type of loan is used for more challenging, and often more costly, upgrades to a residential
property.
The term ‘heavy’ may be interpreted differently from one lender to the next, but it usually covers all changes that involve some kind of structural change to the building.
- Any project that requires planning permission
- Any refurbishment that requires you to apply for planning permission
- Internal and external structural changes
- Loft conversions, garage conversions, and extensions
- Building regulations
While a bridging loan may be a great finance option for ‘heavy’ refurbishment, it may be more beneficial to look at applying for a development loan instead. Development finance will often be a better choice when your project is of a sizeable nature, for example, if you were converting a commercial building into a block of flats.
How much can I borrow?
The amount you can borrow will be determined along with your eligibility for a refurbishment bridging loan. Most lenders who offer refurbishment bridging loans will provide loans of up to 75% of the post-refurbishment value of the property. It is sometimes possible to qualify for a higher LTV, though a sizeable deposit may be needed alongside a good credit history and a strong financial track record.
Your lender will base much of their decision on the projected future value of the property. You will also be expected to provide verification of your financial position, your income, and your capacity to repay the loan as agreed.
If you meet the criteria set out by the lender, there are technically no limitations to how much you can borrow. Development finance may be more suitable for larger renovation and redevelopment projects. Call UK Property Finance anytime to discuss the available options.
How much do refurbishment bridging loans cost?
The type of refurbishment bridging loan you apply for will determine the overall borrowing costs you can expect. For example, some refurbishment bridging finance is issued as short-term bridging loans, which are designed to be repaid within a matter of months. In which case, you could be looking at a monthly rate of interest as low as 0.5% or less.
Longer bridging loan repayment periods mean higher overall borrowing costs. The size of the deposit you provide will also influence the affordability of your loan. Bigger deposits (and lower bridging loan LTVs) typically reduce borrowing costs for all types of bridging finance. Your credit history and financial status at the time of your application will also play a role.
Your choice of lender will make a big difference in how much you can expect to pay for your refurbishment bridging loan. If you work with an independent specialist with an established track record, you will be offered a competitive deal to suit your requirements.
Is it possible to borrow money for refurbishment if you have bad credit?
Yes, it’s possible to borrow money for refurbishment even if you have bad credit, though it might be a bit trickier. Traditional lenders like banks might be hesitant, but there are other options, like secured loans, where you use your property as collateral. Some lenders specialise in working with people who have bad credit, though the interest rates can be higher.
Another option could be personal loans from credit unions or online lenders who might be more flexible.
Just be sure to compare terms and understand the costs before committing anywhere.
Flexible Interest Payment Options for Bridging Loans
Refurbishment bridging loans often offer the flexibility of deferring interest payments until the end of the loan period rather than paying monthly. This “roll-up” option can be particularly appealing as it reduces the monthly payment burden, allowing you to allocate more funds towards your development projects.
Short-Term vs. Long-Term Bridging Loans for Refurbishment
Refurbishment bridging loans typically align with standard bridging loan timelines, which range from a few months to up to 24 months. The availability of longer terms usually depends on the scale of the refurbishment. For light refurbishment projects, shorter terms are more common, whereas more extensive refurbishments may qualify for extended loan terms. These options often present a more advantageous alternative to traditional property finance offered by private banks. It’s essential to select the finance option that best matches your ability to repay within the stipulated time frame.
Tailored Property Finance Solutions
At UK Property Finance, we specialise in offering customised advice based on your specific needs, ensuring that you secure the most suitable finance arrangement.
Steps in the Property Refurbishment Finance Application Process
Once you submit your application, the lender typically reviews it and issues preliminary terms within 4 to 24 hours. After receiving these terms, you’ll need to provide additional information. The application will then undergo a full underwriting process, which includes appointing a surveyor to assess the property’s value. If all goes well, a formal offer is made, and the loan can proceed, contingent on completing the legal formalities.
Information Required for a Refurbishment Loan Application
To apply for a refurbishment bridging loan, lenders usually require the following details:
- A completed application form detailing your current financial situation.
- A summary of your assets and liabilities.
- Information about the property you intend to purchase or refinance.
- A comprehensive outline of the planned refurbishment, including costs and timelines.
- An estimated post-refurbishment value of the property.
- A record of your experience or previous projects.
- A clear exit strategy plan.
Exploring Alternatives to Bridging Loans for Refurbishment
While bridging loans are a popular option for refurbishment, other types of development finance may also be available, especially for landlords or limited companies. Commercial finance could be a viable alternative in these cases.
Can you get bridging loan for refurb?
Yes, it’s possible to obtain a bridging loan for a refurbishment project. Bridging loans are versatile financing options that can be used for various purposes, including property refurbishments. These loans provide short-term funding to cover the cost of refurbishment work, such as renovations, repairs, or upgrades, before longer-term financing or exit strategies are implemented, such as selling or refinancing the property. Bridging loans for refurbishments typically offer fast approval processes and flexible terms, allowing borrowers to access funds quickly and efficiently to undertake renovation projects. The property undergoing refurbishment often serves as collateral for the loan, reducing risk for the lender. Overall, bridging loans provide a valuable financial tool for individuals looking to fund refurbishment projects and add value to their properties.
At UK Property Finance, we provide a whole-of-market brokerage service for refurbishment bridging loan applicants. We will compare the best deals and the lowest rates from dozens of specialist lenders across the UK. Being a master bridging finance broker means that we have partnerships with lenders that provide the best interest rates in the UK. We welcome residential applicants as well as landlord or investment companies looking for refurbishment bridging finance. It’s easy to arrange an appointment online using our online calculator, book a call, or leave your contact details and we will get in touch.
For more information or to discuss your eligibility for a refurbishment bridging loan in more detail, contact a member of the team at UK Property Finance today. We are open until late, 7 days a week.
