Refurbishment Loans

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What is refurbishment finance?

Refurbishment loans are a useful finance tool for investors looking to add value before selling or refinancing investment property.  In most instances, this short term solution allows you to minimise the initial cash contribution to your project, whilst maximising the return on your investment. It could allow you to borrow to fund the cost of the works involved in completing the refurbishment, in addition to a contribution towards the initial purchase.

Read more about how Refurbishment loans work by downloading our helpful guide or selecting a question below:

Sarah Woolf

With the demand for investment properties in need of renovation on the increase and the return on investments so attractive, we’ve seen a surge in new Lenders and products to the market looking to lend towards the refurbishment costs of the project.

Different Lenders in the market categorise the level of works involved in different ways. In order to keep things simple, we refer to your project as a light or heavy refurbishment and which category your property falls into is determined by the nature and scale of that work.

Sarah Woolf


What is the difference between light and heavy refurbishment?

A light refurbishment is generally defined as works to a property that are non-structural and do not require planning permission. Works might include, repainting, rewiring or installing a new kitchen and bathroom. Most lenders differ in their definition, but the cost of works does not generally exceed 15% of the property value.

A heavy refurbishment generally consists of major structural work such as an extension or conversion from commercial to residential and where there are substantial cost of works. This work may require planning permission, which will need to be granted before the loan can be drawn down. In some circumstances, such as the conversion of a building into a block of apartments, development finance might be more appropriate.

How are loans for heavy refurbishment structured?

There are two ways to fund a light refurbishment project using short-term finance. The first is to raise funds against the purchase price or value of a property and then fund the cost of works yourself.  The second being to raise funds against the purchase price or value and the cost of the works being carried out.

Where lending for refurbishment costs is required, lenders will look to

What experience do you need?

We have lenders on our panel that will look to fund projects from experienced developers and also those looking to develop for the first time.

If this is not your first development, lenders will want to understand what experience you have and this can be evidenced by the projects that you have completed previously.

Any lack of experience can often be supported by having the right professional team around you and a strong exit strategy in place which will either be refinance onto longer term finance or sale.

What are the options for servicing my refurbishment loan?

The definition of a light refurbishment differs from lender to lender, however in the main, it is works to the property that are not of a structural nature and where there is no planning required or change of use.  A light refurbishment bridge is often used when purchasing a property that requires works before rental with the aim of adding value and are more often used where the EPC rating of the security is not sufficient to meet standards.

Heavy refurbishment of an existing property is often confused with development finance as the lines between the two can seem blurred. The definition of a heavy refurbishment project is often dictated by the cost and the structural nature of the works and can require an planning permission or change of use.  Some projects, such as certain conversions from commercial to residential,  can be completed under permitted development, but the works required to convert are costly and require longer to complete.

How are loans for light refurbishment structured?

There are two ways to fund a light refurbishment project using short-term finance. The first is to raise funds against the purchase price or value of a property and then fund the cost of works yourself.  The second being to raise funds against the purchase price or value and the cost of the works being carried out.

Where lending for refurbishment costs is required, lenders will look to

How to Prepare to apply for a Refurbishment Loan?

It’s always good to be prepared and applying for development finance is no different.

  • If you’re purchasing land, it’s important to ensure that you carry out the necessary due diligence and that it has the correct planning permission in place for your planned build. Finance is available to purchase the land before planning is obtained, if necessary.
  • Lenders will expect you to provide a detailed breakdown of costs.  These should include the cost of purchase, professional fees (legal, planning, architect and QS and building control etc.), build costs and a contingency to cover cost overruns.
  • Most development finance is funded in stages (or draw downs) where funds are released along an agreed timeline throughout the build. You will need to think about the stages in advance and when you will need funds to be released to move to the next stage.  This will then be agreed with the lender to help the build run smoothly and ensure that you have the funds available when you need them.
  • If you have completed Development projects previously, it’s helpful to prepare a CV to accompany your portfolio.  It should include details of any planning obtained, a breakdown of the costs, any professional services used and managed and evidence of the finished project.  If this is your first development, a CV from your contractor and other professional services will be essential.
  • Prepare an Asset and Liability statement and financial accounts (if available).  This will help the lender understand your financial position.
  • If, as part of your own due diligence, you have approached local agents for their opinion on value and demand for sale, it’s always helpful to include this in your plans, as local knowledge always helps.
  • Always have a good understanding of how you will exit the development finance once the project is complete.  If you intend to keep the property, we can help obtain an indication of the funding available and if you intend to sell, evidence of your research on demand for sale will give some initial reassurance.

What fees will you have to pay?

Arrangement fee: Also referred to as a facility fee is charged by the lender for arranging the loan and is typically between 1-2% of the loan amount

Exit fee: The exit fee is charged when repaying the loan, but it is not charged by all lenders. Those that do charge a fee will typically charge 1-2% of either the loan amount or the Gross Development Value (GDV).  This can make a big difference to the overall cost.

Valuation fees: The lender will instruct an initial valuation on the Development. This will be a detailed report to ensure that the estimated costs of work are realistic and that any risks to the lender and the project are considered.  The cost of this report varies between lenders.  Quite often the Lender will instruct a Monitoring Surveyor to visit the project before any release of funds, to ensure that the build is progressing as planned and to the agreed standard.  This will be at your cost.

Interest: In most cases, interest is only charged on the funds released and is ‘rolled up’ (added to the amount that you owe) which means that you do not have to make payments each month. The amount you borrow increases as the funds are released and so does the amount of interest you pay.

Draw down fees: This is not charged by all lenders, but some will charge a fee as funds are due to be released.  This covers the administrative costs of releasing the funds.

legal fees: You are obliged to cover all legal costs associated with the loan, including those for the lender themselves.  The cost of this varies from lender to lender.

Professional fees: It’s important to factor in the cost of using the services of professionals throughout the course of your project. This might include Architects, Quantity Surveyors, Contractors etc. Most lenders will allow you to add these fees to your costs when calculating your loan.

Understanding the Bridging Finance process

We have years of experience in helping our clients apply to finance their property development projects and we will guide you through the process. This will always start with a conversation with one of our consultants:-

  • Initial enquiry – understanding you and your plans.  We will ask you to provide as much information about your project, estimated costs and business plan as possible before approaching lenders.
  • Research the market and provide indicative terms.
  • Site visit with prospective lenders.  Our lenders like to meet you on site to assess the project’s viability and this is where your relationship with the lender begins.
  • Formal loan offer issued, once the lender’s credit team has reviewed all information.  This will include the terms on which they are prepared to offer, subject to valuation.
  • Valuation of the land and planned project. This will include a valuation of the existing site, review of predicted build costs, expected Gross Development value (GDV) and commentary on the exit strategy once complete.
  • Legal process. Once the offer is signed, you will need to appoint a Solicitor to represent you and the Lender will have separate representation. It is important that you choose a Solicitor with experience in dealing with the lending process.
  • Completion of the loan.  The first payment is paid on completion, followed by further draw downs at agreed stages throughout the build.
  • Repayment of the loan

Repaying your Refurbishment Loan

It’s important to plan for the repayment of your property development finance loan before you even approach lenders to fund the project.  This is for your benefit as much as the lender’s, as you will need to ensure that you can complete and repay within the agreed timescale. Your ‘exit strategy’ will depend on your plans for the project once complete and may include:-

  • Sale of the property to raise the funds to repay the loan.  You will have an understanding of the demand and value and the Valuer will also give their opinion.
  • Refinancing the property onto a Development Finance Exit product (or marketing bridge)
  • Refinancing the property onto a longer term loan in order to retain it for investment purposes.  The Valuer will also give their opinion on the demand for rental.

What is Bridge to Let?

Yes, there are products available that will allow you to complete a development project part way through the build.  This is sometimes referred to as ‘finish and exit’ as the product does just that!

The Finish & Exit is designed for projects which are part-complete. It may be that you have run out of funds from the existing facility and so there are insufficient funds to complete the project or you may have been relying on sales that have taken longer than anticipated and require the funds to move to the next stage.


Are you looking to purchase a property, add value through a refurbishment and then sell or retain for rental? Is the property not currently mortgageable or requires planning permission to convert to an alternate use? Lenders in the short-term finance market have created products which work with and for you in completing your projects and/or building your portfolio.

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Development Exit

Development Exit finance, also known as a ‘marketing bridge’ is often used by clients who are approaching the completion of a project and need time to sell. It’s not always possible or can be costly to extend your development finance and a short-term-loan, at a lower cost, may be the solution.

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Auction Finance

If you are buying a property at auction, you will have 28 days to pay the remaining balance and complete your purchase. Short-term finance is often used as, by its nature, it ‘bridges’ the gap between purchase and securing longer term finance. It can be used to purchase residential, semi-commercial and commercial property and also land.

> Read More

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