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Refurbishment Finance

If the property is in need of works, whether it be a modernisation, reconfiguration or an extension, we can help.

Traditional mortgage lenders require properties to be in good condition with all the necessary amenities. If you are looking to purchase a property with no bathroom or kitchen, or in need of significant works before being habitable, then bridging finance is utilised.

This type of bridging loan is often categorised by the extent of works required, into “Light Refurb” and “Heavy Refurb” categories. Generally heavy refurbishment involves a change of use or make-up of the building, perhaps requiring planning consent and/ or building regulations approval.

We can arrange a facility to cover the cost of the works in addition to a percentage of the purchase price if a significant amount of works are required.

Refurbishment Finance is also sometimes known as Conversion Finance. This form of finance is usually a type of Short-Term Loan, or Bridging Finance.


How is the loan structured?

A refurbishment loan is usually in 2 parts. The first part will be used to purchase the property, with the 2nd part being used for the refurbishment costs, and that in itself can be split into various “tranches”.

For example, if you had seen a property for sale at £200,000 in an auction, that could be worth £300,000 after spending £30,000 of refurbishment costs, the loan will work as follows:

Initial Advance of 70% of the purchase price, which gives £140,000

This would require a deposit of £60,000, with the lender providing £140,000 towards the purchase.

The refurbishment works start, and after a spend of £15,000 the lender sends out their asset manager to confirm the works have been done. Once this confirmation is received by the lender, they reimburse the £15,000. This process would be repeated for the 2nd£15,000 stage of works.

What is a Light Refurbishment project?

A light refurbishment deal is where the property only requires small improvements, or cosmetic works to an existing structure. This may be as little as decorating, but could also include a new bathroom and kitchen.

What is a Heavy Refurbishment project?

Heavy refurbishment involves some form of structural change, or a requirement for planning permission, or Building Regs sign-off, and also Permitted Development conversion projects. This can include adding an extension or a loft-conversion, or an internal re-configuration where walls are removed. If planning permission is required for any of the works, it is likely to be considered a heavy refurbishment.

What Interest rate should I expect to pay?

Rates can be as little as 0.4% per month, but it really is all “case by case”. Factors that impact on the rate include the amount of cash the developer has put into the deal, the amount of work required, the loan to value, the loan to Gross Development Value (end value, after works), geographical location and the borrowers level of experience, and credit history.

What fees will there be?

Arrangement Fee – This is the lenders loan administration fee and will be added to the loan.

Exit Fees – An exit fee may or may not be charged. Typically these are becoming less common.

Valuation Fees – A RICS valuer will generally be required to value the property on behalf of the lender. The borrower will be required to pay for this valuation.

Legal Fees – These are charged by solicitors to ensure the transaction is carried out properly and registered with the land registry in the correct way.

Typical Scenarios for Refurbishment Loans include:

Below Market Value purchase, due to the property condition.

Auction purchase, in need of renovation.

Purchasing and un-mortgageable property (no kitchen or bathroom)

To raise funds to finish a property when the borrower has ran out of their own funds.

Product highlights

Market Leading Rates

100% Loan to Value funding available – with additional security

Loan Terms from 1 month to 24 months

Loans from £25,000 to £100m

No Exit fee loans available

Rolled up, retained or deducted interest options available

Staged payment facilities available

Applicants can be individuals, Sole Traders, Partnerships, Ltd Cos, LLPs and SPVs

Light and Heavy Refurb Products

Lending in England, Scotland, Wales, Northern Ireland and Eire, and even selected European destinations.

If you want a fast, flexible and reliable service, try
Positive Commercial Finance.


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