Bridging for Refurbishment
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Bridging for Refurbishment
Georgina Gray talks us through bridging for refurbishment.
What is a refurbishment bridging loan? How does it all work?
Refurbishment bridging loans are short-term finance used to buy a property and fund works that make it mortgage-ready, and will increase its value. You take the loan, complete the refurbishment, and then repay it through sale of the property or refinancing it.
What are light refurbishment bridging loans? What does that mean?
A light refurbishment is non-structural works – the cosmetics, like new kitchens, bathrooms, flooring, that kind of thing. There won’t be major changes to the structure or the planning of the property. They’re usually quicker to arrange, because the risk of light refurbishment is a lot lower.
What is a heavy refurbishment bridging loan?
A heavy refurbishment bridging loan is for structural or planning-related works. That could be extensions, loft conversions or reconfiguring the layout of a property – anything that requires building regulations or planning approval.
Lenders usually want a lot more detail for a heavy refurbishment bridging loan, including a schedule of works and timelines.
Who is a refurbishment bridging loan for? Can anyone get one of these?
Yes, anyone can get a bridging loan as long they meet the main requirements. Typically, refurbishment bridging loans tend to be taken by investors, landlords and developers – people who need a short-term boost of funds to improve a property before refinancing it or reselling. You don’t need to be experienced, but a clear plan will obviously help.
How much can I borrow with a bridging loan for refurbishments?
Many lenders will go up to around 70% to 75% of the property’s value, and some will also fund a percentage of the refurbishment costs. Exact figures will vary, so it’s worth speaking with a mortgage adviser to get a better idea of what you can borrow – and the regulations.
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How much do refurbishment bridging loans cost?
Costs usually include interest, which is charged monthly – or sometimes daily with some lenders – plus arrangement fees, valuation fees and legal fees. The exact cost will depend on the loan size, the Loan to Value, and how long you’re borrowing for.
Keeping the refurbishment on time is important, because a longer term means more interest will be charged.
How do I apply for a refurbishment bridging loan? What’s the process?
Go to a mortgage adviser for this. We will talk you through the application process and what you’ll need. The documents required will be ID and proof of address, as always, plus details of the property, a valuation, a schedule of work, costings, and, of course, evidence of your exit strategy.
How can a broker help with bridging for refurbishment?
A broker helps match the project you’re looking to do with a lender that will accept that level of refurbishment, the timeline, and your exit strategy. We also flag any planning or licensing steps with you so your project stays on track. That way, the loan doesn’t run longer than planned – and obviously you’ll want to pay as little in interest as possible.
Key Takeaways:
- Refurbishment bridging loans are short-term finance used to buy a property and fund necessary works to make it mortgage-ready or increase its value, which is then repaid by selling the property or refinancing it.
- There are two main types: light refurbishment (non-structural, cosmetic works) and heavy refurbishment (structural or planning-related works like extensions or loft conversions).
- The loans are typically for investors, landlords, and developers, but are available to anyone who meets the main requirements.
- Lenders commonly allow borrowing up to 70% to 75% of the property’s value, and costs include interest (charged monthly or daily), arrangement fees, valuation fees, and legal fees.
- The application process requires documents such as ID, proof of address, property details, a valuation, a schedule of work, costings, and evidence of a clear exit strategy, with a broker helping to match the project to the right lender.
SOME BRIDGING FINANCE IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
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