Funding property improvement works before sale, letting or refinance
Many properties need work before they can be let, sold at full value or accepted by a conventional mortgage lender. Refurbishment finance bridges that gap. It provides the funding needed to carry out the works while the property itself secures the loan, with repayment typically coming from the sale or refinance of the improved property.
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Refurbishment finance sits between standard bridging finance and full development finance. It is designed for projects that involve more than cosmetic improvement but do not reach the scale of a ground-up development.
Light and heavy refurbishment
Light refurbishment
Cosmetic and non-structural works such as redecoration, new kitchens and bathrooms, flooring and general updating. Some standard bridging lenders will include a light refurbishment element within a conventional bridging facility. The works do not require planning permission or building regulations approval.
Heavy refurbishment
Structural works, extensions, change of use, conversion of internal layouts or anything that requires planning permission or building regulations sign-off. These projects require specialist refurbishment finance lenders rather than standard bridging. The lender will want to see a clear scope of works, a cost schedule and a realistic exit route.
How refurbishment finance is structured
For light refurbishment, the funds may be released in full at the start. For heavier works, the build element is typically drawn in stages as works progress and are verified. Interest is charged on what is drawn, not on the full facility.
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The loan is assessed against both the current value of the property and the projected value on completion of the works. Lenders will want to understand what the property will be worth once the refurbishment is complete, as this determines the exit route and the amount available.
When refurbishment finance may be useful
Purchasing a run-down property at a lower price and improving it before sale or letting
Refurbishing an existing investment property between tenants to achieve a higher rental value
Converting a property from residential to an HMO or converting from commercial to residential
Preparing a commercial property for a mortgage by improving it to a lettable standard
Carrying out structural works to a property that a standard mortgage lender would not currently accept
Is Refurbishment finance right for your situation?
Refurbishment finance is likely to be relevant if:
You have a property that needs significant work before it can be let or sold at full value
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The works are too substantial for a standard bridging facility but do not constitute a full development project
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You have a clear scope of works and a realistic exit route once the refurbishment is complete
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Refurbishment finance may not be appropriate if:
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The project involves ground-up construction or a full change of use requiring planning permission - development finance may be more appropriate
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The exit route is unclear or the post-refurbishment value does not support the level of borrowing needed
The goal is simple. Fund the works, add value and repay through sale or finance.