Whether you’re planning to refresh a dated buy-to-let or undertake major structural changes, getting the right funding can make or break a project.
Refurbishment bridging loans are short-term property loans that offer a practical solution when you need quick access to funds for renovation work.
They’re designed specifically for property improvements – from simple cosmetic updates to complete structural overhauls.
This guide will walk you through everything you need to know about light and heavy refurbishment bridging loans. You’ll learn how they work, what they cost, and how to choose the right option for your project.
What Are Refurbishment Bridging Loans?
Refurbishment bridging loans are short-term property based loans that are designed to fund renovation work, quickly and flexibly.
These loans can be set up in a matter of days or weeks, giving you quick access to the money you need for your project.
How They Work
As with all bridging loans, the debt is secured against your property and runs for a set period – usually between 3 and 18 months.
You’ll receive the money in stages as your project progresses, rather than as one lump sum. This staged release helps keep your project on track and ensures funds are available when you need them.
Let’s say you’ve found a Victorian house that needs modernising.
With a property value of £650,000 and renovation costs of £150,000, you might seek a bridging loan of £500,000. The lender would release the first part to help you buy the property, then provide further releases to fund each phase of the renovation work.
What Makes Them Different?
Unlike standard bridging loans, refurb loans are specifically structured for property improvements. They offer more flexibility with payment schedules and take into account the increased value of your property after the work is completed.
The amount you can borrow depends on several factors, including:
- Your property’s current value
- The estimated value after improvements
- The scale of your planned works
- Your exit strategy (how you’ll repay the loan)
Our lenders will consider loans from £150,000 upwards, with the loan term matching your project timeline. You’ll need to have a clear plan for repaying the loan – usually either by selling the improved property or refinancing to a standard mortgage.
Read more: Refurbishment Bridging Loans
Light vs Heavy Refurbishment
When it comes to property improvements, the scale of your planned work will determine whether you need a light or heavy refurbishment loan.
Each lender has their own interpretation, which broadly means:
Light Refurbishment Projects
Light refurbishment covers cosmetic improvements and basic property updates.
Think of it as giving your property a facelift without changing its basic structure. You won’t need planning permission for light refurbishment work.
Common projects include:
- Updating kitchens or bathrooms
- Replacing windows and doors
- Installing new flooring
- Rewiring or updating central heating
- Decorating throughout
For example, replacing an outdated kitchen with modern units and appliances would count as light refurbishment. The work might take 4-6 weeks and cost £25,000, but wouldn’t alter the building’s structure.
Heavy Refurbishment Work
Heavy refurbishment involves significant structural changes or major building work.
These projects often need planning permission and must comply with building regulations. They’re more complex, take longer to complete, and usually cost more.
A heavy refurbishment might involve:
- Adding extensions
- Converting lofts or basements
- Removing supporting walls
- Changing the building’s use
- Complete property rebuilds
Take a side extension project, for instance.
You’d need architectural plans, planning permission, building regulations approval, and structural engineers’ input. The work could take 3-6 months and cost £75,000 or more.
Building Regulations and Planning Rules
For light refurbishment, you’ll mainly deal with building regulations for specific elements like electrical work or window replacement.
Heavy refurbishment generally requires full planning permission before you start.
Remember that requirements vary between local authorities.
What’s allowed under permitted development in one area might need planning permission in another. You should check with your local planning office before finalising any plans.
Let’s talk bridging loans!
Who Uses These Loans?
Refurbishment bridging loans suit a wide range of property owners and investors. You might be surprised to learn who can benefit from this type of funding.
Property Developers and Investors
If you’re a developer or investor, these loans can help you act quickly when you spot an opportunity. You might use them to buy and improve properties before selling them on or adding them to your rental portfolio.
Here’s a real example:
A property investor in Maidstone bought a run-down three-bed house for £400,000. Using a bridging loan of £475,000, they covered both the purchase and a full renovation. After six months of work, the property sold for £650,000, creating a healthy profit even after loan costs.
Related: Can a Bridging Loan Be Used for Renovations?
Landlords Improving Their Properties
As a landlord, you might need to upgrade your properties to meet new energy efficiency rules or to boost rental income. A refurbishment loan can help you quickly fund improvements without using your regular buy-to-let mortgage.
Related: Why Buy-to-Let Landlords Use Bridging Finance
Business Property Owners
If you own commercial property, these loans can fund shop fit-outs, office modernisation, or warehouse improvements. They’re particularly useful when you need to complete work quickly to minimise business disruption.
Private Homeowners
You might consider a refurbishment loan if you’ve bought a property that needs work before it’s suitable for a standard mortgage. This often happens with auction purchases or when buying unmortgageable properties.
Related: How to Finance an Auction Property
Costs and Considerations
Before taking out a refurbishment loan, you’ll need to understand all the costs involved, as bridging loans aren’t cheap.
Let’s look at what you might pay beyond just the loan amount itself.
Upfront Fees
The main cost you’ll face at the start is the lenders’ arrangement fee. This usually amounts to 2% of your loan. So on a £500,000 loan, you might pay £10,000 in arrangement fees.
You’ll also need to budget for property valuation fees. These vary based on your property’s value and location, but for a £500,000 property, expect to pay £800 to £1,500 for a valuation report.
Related: Do You Need a Property Valuation for a Bridging Loan?
Loan Interest
These types of short-term loan have monthly interest rates. So you’ll get charged interest on whatever you owe the lender.
If you choose to ‘roll-up’ the interest your balance will increase and the interest becomes compounded.
Related: How Do Bridging Loan Interest Options Work?
Legal Requirements
Legal fees cover both your solicitor and the lender’s legal team.
Each party needs separate representation to protect their interests. Budget around £1,500 to £3,000 for legal costs, depending on your project’s complexity.
Related: Do I Need a Solicitor for a Bridging Loan?
Other Costs to Consider
You might encounter additional charges such as:
- Admin fees for processing your application
- Exit fees when you repay the loan
- Quantity surveyor fees for larger projects
- Building insurance requirements
For example, if you’re borrowing £500,000 for a six-month term, your total costs might include:
- £7,500 arrangement fee
- £1,200 valuation fee
- £2,500 legal fees
- £750 admin fee
Monitoring Fees
For the heavy refurbishment projects, lenders may require regular site visits from a monitoring surveyor. Each visit might cost £500 to £750, and you’ll need to factor these into your budget.
Remember that lending criteria and fee structures vary between lenders. A broker can help you find the most cost-effective option for your situation.
Planning Your Project
Good planning makes the difference between a smooth refurbishment and a project that runs over budget and schedule. Let’s look at how to set your project up for success.
Getting Your Budget Right
Start by breaking down all your costs. Your first consideration should be the main building work and materials, but don’t forget about professional fees and smaller items that can add up quickly.
Most projects should set aside at least 10% as a contingency fund. For example, on a £150,000 refurbishment, you might allocate £100,000 for building work, £35,000 for materials, and keep £15,000 as a safety net for unexpected issues.
Choosing Your Team
Finding the right contractor is one of your most important decisions.
While it might be tempting to go with the lowest quote, experience and reliability matter more. Ask potential contractors for references from recent clients and examples of similar projects they’ve completed.
Any reputable contractor will be happy to show you their previous work and put you in touch with past clients. Make sure they have proper insurance and can provide a detailed quote that outlines exactly what’s included.
Managing Your Timeline
Create a realistic timeline by working backwards from your loan term.
A six-month project needs careful planning to ensure everything happens in the right order. The early weeks will focus on strip-out and preliminary work, followed by the main building phase.
You’ll want to leave enough time at the end for finishing touches and sorting out any snags before your loan term ends.
Building Control and Regulations
Don’t overlook the importance of building regulations compliance.
Book your building control visits well in advance – you’ll need inspections at several stages throughout your project. Your building control officer will check everything from foundations to final finishing, ensuring your work meets all required standards.
Keep all your paperwork organised, as you’ll need completion certificates when you come to sell or refinance the property.
Exit Strategies
Having a clear plan to repay your bridging loan is just as important as the renovation work itself.
Your exit strategy needs to be realistic and well-planned before you even apply for the loan.
Selling Your Property
Selling after refurbishment is a popular and straightforward exit route.
Once your improvements are complete, you can put the property on the market and use the proceeds to repay the loan. You’ll need to research local property values carefully and allow enough time for the sales process.
Remember that market conditions can change during your project, so it’s wise to build some flexibility into your timeline.
Moving to Long-term Finance
Many property owners choose to refinance onto a standard mortgage or buy-to-let loan.
This works well if you’ve increased the property’s value through your improvements. For instance, if you’ve borrowed £500,000 to renovate a property now worth £750,000, you should find it easier to secure long-term finance at a good rate.
Related: Can You Pay Off a Bridging Loan with a Mortgage?
Using Rental Income
If you’re improving a buy-to-let property, you might plan to use rental income to help secure a new mortgage. Make sure you understand local rental demand and likely achievable rents.
Backup Plans
Smart investors always have a Plan B.
You might keep another property ready to sell if needed, or maintain a good relationship with several lenders. The key is staying flexible – if one exit route becomes blocked, you’ll need alternatives to avoid extra costs or pressure to sell quickly.
Remember that your choice of exit strategy will affect which lenders will consider your application and what rates they’ll offer.
Having a solid, provable exit plan can help you secure better terms on your bridging loan.
How a Broker Can Help
Getting the right finance for your refurbishment means looking beyond the obvious options.
A broker can open doors to lenders you might not find on your own. They’ll understand which lenders suit your specific project and can often secure better terms through their established relationships.
A good broker will help shape your application to highlight its strengths.
They know what each lender looks for and how to present your exit strategy convincingly. This insight can make the difference between approval and rejection, especially for more complex projects.
Your broker will also handle negotiations and paperwork, freeing you to focus on planning your refurbishment. They’ll work to get your loan approved quickly, which can be essential when you’re keen to start your project.
Next Steps For Your Refurbishment Project
Ready to move forward with your refurbishment plans?
Start by working out exactly what you want to achieve with your property. Once you’ve got a clear vision, gather details about the work needed and estimated costs.
Having these basics in place will make your first conversation with a broker much more productive. They’ll be able to match your project with suitable lenders and help you understand your options clearly.
Remember, every successful refurbishment starts with proper planning.
Whether you’re considering a light refresh or major structural changes, taking time to get the right funding in place will help your project run smoothly from start to finish.
FAQ
The minimum loan for our lenders is £150,000.
This depends on the type of refurbishment.
For light refurbishment, usually no. For heavy refurbishment, having planning permission in place can help, but some lenders will consider applications before permission is granted.
Yes, these loans work for both residential and commercial properties, though terms might differ.
Yes, as these loans are primarily secured against the property. However, you’ll need a strong exit strategy and might pay higher rates.
Contact your lender early to discuss extending the loan term. This usually incurs additional fees but is better than defaulting.
Read more: Can You Extend the Term of a Bridging Loan?
Yes, but you’ll need specialist contractors and relevant permissions. Some lenders specialise in listed building projects.
Some lenders allow this for light refurbishment if you’re qualified. Heavy refurbishment usually requires professional contractors.
Yes, you’ll need a solicitor experienced in bridging finance. Your broker can usually recommend one.
Read more: Do I Need a Solicitor for a Bridging Loan?
Yes, you can borrow both the purchase price and refurbishment costs through a refurbishment bridging loan.
Lenders usually offer up to 75% of the purchase price and can fund up to 100% of your refurbishment costs.
For example, if you’re buying a property for £400,000 and planning £100,000 of improvements, you might borrow £400,000 (including your deposit) with the refurbishment money released in stages as work progresses. You’ll need a suitable deposit, and lenders will look carefully at the projected final value of the property when deciding how much to lend.
