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Renew Your Vision: Unleashing the Power of Property Refurbishment Finance

Financing refurbishments and renovations

Buying a property to refurbish or renovate can be a great way to develop a quality portfolio and build capital. High quality property results in happier tenants, higher rents and in happier investors!

With the almost permanent shortage of quality property in the UK market and increasing pressure on investors to find ways to improve their margins, refurbishment is a great option.

Whether buying to refurbish, buying to convert or upgrading your existing stock, getting the right funding will ensure your project goes without a hitch (well, at least a financial hitch!)

Because you can buy smarter you can save money and help develop a stronger portfolio.

There are a variety of finance options for refurbishing, depending on the extent of the work required, the uplift in value and whether planning permission.

What types of property refurbishment finance are there?

The range of finance comes down to the type of property, the extent of the refurbishment or renovation required (in cost and time), the finished value and your plan with the finished property.

Because we’re working for you with a wide panel (over 360 lenders), we’ll work together to consider each option before we make a recommendation.

  • Bridging loans;
    • Perfect for almost any property purchase.
    • As the funding is based not only on the purchase price of the property but also on the finished value – different schemes will allow more funding or lower cost;
      • Finance 90% of purchase price and fund the refurbishment works yourself
      • Fund 75% of the purchase price and up to 100% of the cost of the works (normally in arrears)
      • For some schemes we can arrange 90% of purchase price and 90% of the cost of works.
    • Borrow to purchase the property and for the refurbishment (up to 100% of works costs).
    • Repayment options;
      • Refinance onto a term mortgage with any suitable lender in the market
      • Sale of the finished refurbishment project or converted property.
  • Bridge to term products;
    • Use the same lender for the bridge as the term mortgage.
    • The mortgage is pre-approved before the property is even bought.
    • Reduced legal & professional fees by not switching lenders
    • You are not tied to the lender if there’s a better option elsewhere.
  • Refurbishment mortgage;
    • For minor or light refurbishments only.
    • No need to use bridging as long as the refurbishment cost is not more than 15% of the purchase price of the property.

Refurbishment or renovation?

The terms renovation and refurbishment are often used interchangeably and, for the purposes of property finance that’s generally fine.

Renovation really refers to the restoration of the existing property – so maintaining its features and style.

Refurbishment may well be the same process or might involve less work, just redecoration & replacing a kitchen or bathroom or could be as much as moving walls and making structural alterations.

Light or Heavy Refurbishment?

Why does it matter?

Finance providers offer products depending on the levels of works and the risk to them as a funder. More risk will often mean higher cost of finance.

Lenders have their own definition of when a light refurbishment becomes heavy but it often relates to;

  • Is planning permission required?
  • Will you be making structural alterations to the property?
  • Will you be making external extensions, either outwards, upwards or downwards?
  • Is the conversion cost a significant percentage of the purchase cost?

How to get a great refurbishment loan

As with any finance product, the quality of the bridging loan you get is directly related to how good a case we can put together for your bridging application.

In short, we’re looking for the following to put a great plan together.

  • The applicants;
    • Your experience and ability to complete any works.
    • Financial situation.
  • The plan;
    • Are your plans for the property feasible, legal and costed?
    • Are you protected from the current rates of inflation? What contingencies have you prepared for?
  • The exit (repayment) plan;
    • For a remortgage, will a mortgage be available?
    • Is the finished value (GDV – Gross Developed Value) realistic and rent (if applicable) sufficient?
    • For a planned sale is the finished property able to be sold in a realistic time?

Frequently Asked Questions – Refurbishment finance.

When would a bridging loan be required for a refurbishment project?

As soon as your project exceeds the budget you have available then finance is going to be a necessity. Some property investors will work through the refurbishment gradually and as their cash-flow allows but the time/cost can sometimes mean that having a property out of action for a number of months could end up costing more than paying the professionals to get the job done quick!

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