Bridging Loans for Refurbishment & Renovation

The UK has always had a love affair with bricks and mortar and investing in property is an attractive proposition for those looking to grow their wealth. But a project coming in under budget is almost unheard of. In order to have access to capital quickly, refurbishment bridging finance offer developers the funds they need to buy, fix up and sell their properties at a profit.

Renovation and refurbishment bridging loans provide investors and landlords with short term finance to upgrade properties before selling or renting them out. Refurbishments are smaller projects than developments, but still require a substantial investment of capital.

Unless you have a significant amount of money stored away that you are prepared to use to fund your new development project, you will likely need to apply for additional investment. At Bridging Options, we help developers “bridge” a gap when there is a shortfall in funding for refurbishments.

What is a refurbishment bridge loan?

Recent economic changes may have made property development slightly less attractive, but there is still a lot of money to be made if executed correctly.  One of the most popular ways to ensure that you receive significant returns on your investment is a quick and speedy turnaround – otherwise known as “flipping”.

For this strategy to be successful, you’ll generally need to buy a property that needs significant work – whether that’s upgrading the interior such as installing a new kitchen or through building an extension like a loft conversion.

Refurbishments take time and money and often traditional forms of lending such as a mortgage can take time to process, are inflexible and in some cases are not even a viable option. This is where a bridging loan can assist.

At Bridging Options, we provide different types of refurbishment bridging loans, depending on the nature of your project.  We can provide an initial advance to get the refurbishments underway and release additional funding as the project progresses or alternatively, provide a lump sum upfront for building work – depending on how high risk the refurbishment is considered to be.

The actual bridge loan amount we will be willing to lend is based on the projected value of the property post-refurbishment, or the anticipated, achievable rental income.

The benefits of a refurbishment or renovation bridge loan

There are three main benefits for taking a refurbishment bridging loan over other forms of finance: –

  1. Fast application process. A quick way to raise capital, with funds being made available in a matter of days.
  2. Short term lending. Specialist lenders like Bridging Options offer refurbishment loans geared towards short-term projects, with terms of finance between 3 and 24 months. This is good news for those who are planning to flip a property as it means you are not locked into long-term loan agreements that may incur early repayment penalties.
  3. Flexible borrowing. Typically, refurbishment bridging loans come with the option to ‘roll-up’ the interest to pay at the end of the term of finance. ‘Rolling-up’ interest can allow you to focus your entire loan on your refurbishment project, as oppose to servicing monthly interest payments.

When might I need a refurbishment bridge loan?

Quite often the greater the refurbishments that are required, the larger the risk and the bigger the potential profit. This is why so many developers seek out properties under the market value at auction.

These properties are often in derelict condition, are valued under £50,000, have structural issues or do not have functioning amenities so are deemed to be unmortgageable by most high street lenders.

A refurbishment bridging loan is often used to convert properties into a habitable state so that you can either sell the property, rent it out or are in a better position to get a longer-term finance arrangement.

What are the differences between light and heavy refurbishments?

At Bridging Options, we offer bridging loans based on whether the development work is classed as a light or heavy refurbishment project.

  • Light refurbishment – A good way of knowing whether you need a light refurbishment loan is whether building regulations or planning permission is required for your proposed development. Minor refurbishment work means that there is no real change to the overall use of the property, rooms and structural layout. For example, you may want to upgrade the heating system, rewire the building or replace a current bathroom or kitchen – but these are classed as aesthetic changes.
  • Heavy refurbishment – Heavy refurbishments are those that require structural changes, building regulations and even planning permission. One determining factor of whether you require a heavy refurbishment bridging loan is if the cost of the development is more than 15% of the property’s overall value. This is because the cost of a structural refurbishment is normally more labour and time intensive.

To find out the best terms and rates for your refurbishment bridge loan, give our expert lenders a call.

How much can I borrow?

 There are a number of factors that determine how much you can borrow and at Bridging Options we consider every refurbishment on an individual basis taking into consideration:

  • The value of the site or property in its current state – i.e. before refurbishment.
  • the build and conversions costs associated with the project; and
  • the expected value of the property once completed.

At Bridging Options, we typically offer around ??% of the conversion costs, but this is negotiable and dependant on the security of your exit plan.

How do I qualify for a refurbishment bridging loan?

As our refurbishment bridging loans are bespoke to fit your requirements, we will also take into account:

  • Your previous experience and track record of property refurbishments.
  • The type of scheme being undertaken.
  • The time it will take to complete the project.
  • The location of the development, details of building regulations and restrictions and proof of planning permissions.

To find out if you qualify for a bridging loan, get in touch with us today and let us know your property plans, how much you need to borrow, what you need it for, and what your circumstances are.

What is my exit plan?

A good, solid exit plan is the most crucial requirement for taking a refurbishment bridging loan. Your exit plan details to the lender how you intend to repay the money at the end of the term of finance, providing them with security and peace of mind.

When it comes to refurbishment, most developers will have an exit plan based around using the proceeds of the sale of the property once the project is complete to repay the loan. If, however, they are planning to keep the property as an investment post refurbishment, then the agreement of longer term finance or rental funding will form part of the arrangement.

In need of refurbishment bridge loan advice?

Whether you are looking to complete heavy refurbishments or minor developments as an independent bridging loan broker we can offer fast and flexible borrowing options for investors of all levels of experience.

We are experts when it comes to providing appropriate funding for all types of property refurbishments and the rates that we offer are highly competitive.

We can also give advice and assistance to ensure that your loan application is successful, whatever your situation or borrowing requirements.

To find out more, give our specialists a call and let our dedicated team of bridging loan brokers help you realise your property ambitions.

Need specialist advice?

Complete the form to arrange your initial free phone consultation with a bridging loan adviser: