Property investors looking to buy a property at a competitive price and then refurbish it will often turn to a refurbishment bridging loan. The speed and flexibility of a bridging loan will allow for quick completion and the opportunity for an investor to secure a property that may fall outside traditional lenders’ criteria due to its condition.
Light refurbishment loans vs heavy refurbishment loans
Property refurbishment is usually referred to as light or heavy. The former is a property that only requires minor upgrades and no structural alterations. How “light” is defined will vary from lender to lender but will usually include upgrades such as the following:
- Electrical work such as rewiring
- Installation of central heating
- Cosmetic improvements and modernisation
- New bathroom or kitchen
Heavy refurbishments are projects that require structural changes, and in many cases will need to obtain planning permission. A “heavy” deal will typically include refurbishment such as the following:
- A refurbishment project that often requires planning permission
- Property extensions including conversions
- Internal and external structural updates
Our refurb bridging offers both light and heavy refurbishment loans that can fund both the purchase and refurbishment of your renovation property.
Which properties can I get a refurbishment loan for?
Our refurb bridging product is available for residential properties that are in need of some serious TLC. Most of the time, property investors will purchase a run down residential property for a low price, renovate and refurbish, creating a dream home that can be sold at a profit.
You can get a refurbishment loan against more than one property, too. You can secure refurb bridging against any number of properties, and the more properties there are for us to use as security, the more money that can be borrowed.
How to get finance for a refurbishment
Applying for a refurbishment bridging loan is easy. Simply contact our friendly and responsive team with your project details and they’ll be in touch with you to get your application on a roll.
When your application is accepted, you’ll either get your loan in one lump sum or as instalments throughout the project. How your loan will be paid depends on the type of loan you have. Light refurbishment cases often receive the entire loan in one go as the amount required can be quite low. For larger more complex projects, funds are usually released in tranches throughout the loan term.
What is the lending criteria for refurbishment bridging?
A typical example of a refurbishment case that we’d look to progress would be the purchase of a tired house that our client is keen to bring back to its former glory.
We would provide funds towards the purchase with the balance being paid by the borrower but we would look to offer up to 100% of the refurbishment money, to be released in stages as the project progresses.
Our LTV position would typically be up to 70% on day one and up to 70% when the works have been completed. We will often provide 100% of the refurb monies which will be released in stages throughout the project. We would typically offer a maximum term of 12 months but this can be stretched for the right case.
Borrowers can be individuals or limited companies and we will consider people from varying levels of experience including those who are just starting out on the property investment journey.
Another thing to remember is that a well-thought-out exit plan is one of the primary requirements for a lender when considering a refurbishment bridging loan application.
An exit plan refers to the strategy used to repay the loan at the end of the loan term. The most common exit strategy used is using the proceeds of the sales of the property to repay the loan in full but refinances are also acceptable to us providing the borrower can demonstrate an offer in principle from the incoming lender.
How is interest paid for refurbishment bridging?
Usually, when you choose refurbishment bridging you can choose to “roll up” the interest which means you pay at the end of the loan term rather than monthly.
This can be a more attractive option for many borrowers as it removes physical monthly interest payments, freeing up more cash for the project. Borrowers are of course welcome to service interest monthly if they wish.
How Velocity Bridging can fund your refurbishment project
Here at Velocity Bridging, we take pride in our flexibility to fund projects of all sizes for people of varying experience levels. Applying for a refurbishment loan couldn’t be easier! Simply head over to our refurb bridging product page and submit an application using the on-page form.
Alternatively, if you want to chat with us about your project and any concerns you may have, you can contact us here.