Refurbishment bridging loans: light and heavy refurb lenders

A refurbishment bridging loan is a short-term loan secured on a property, sized to cover both buying (or refinancing) the property and paying for works to improve it. It is repaid at the end of the term, usually by selling the finished property or refinancing it onto a longer-term mortgage. It sits between a standard bridging loan, which funds a purchase with little or no works, and development finance, which funds a new build or a major conversion.

If the scheme is a ground-up build or a large conversion, our guide to property development finance explains how that differs. This page covers refurbishment.

Lenders split refurbishment by how much structural work is involved and how much it costs relative to the property’s value. Each lender sets its own line. Signature Property Finance publishes a clear version:

Other lenders describe it differently. Mint Property Finance uses light, medium and heavy categories, and asks for a costed schedule of works with milestones. MT Finance treats heavy refurbishment as structural work. Glenhawk requires the property to be structurally sound. Octane Capital caps works under its core product at £500,000 or 75% of current value, with a separate product for £500,000 to £1 million of works.

The table shows each lender’s refurbishment products in its own published words, from its profile in our directory of UK business lenders. Lenders are listed alphabetically. Several also lend through intermediaries only.

A lender’s terms can change after the date shown, so check its own pages before you rely on a figure.

• Black & White Bridging lends £100,000 to £5 million on its refurbishment bridge, funds up to 100% of build costs with a maximum drawdown of £250,000 per transaction, caps loan to GDV at 70% and rolls interest up.
• Colenko lends up to £3 million for up to 18 months at up to 75% LTV net, from light to heavy works and HMO conversions, releasing funds in stages confirmed by a monitoring surveyor, in England and Wales.
• Glenhawk lends £300,000 to £10 million for 3 to 24 months, advancing up to 75% of value for residential or 70% for commercial, and funding up to 100% of refurbishment costs on a first charge.
• Lendhub lends £250,000 to £10 million for up to 24 months, at up to 75% LTV and 90% loan to cost, and asks that at least one borrower or guarantor has completed three refurbishment projects in five years.
• Mint Property Finance lends on residential houses and flats for up to 12 months at up to 75% LTV, or up to 90% on day one on its higher tier.
• MT Finance offers light refurb bridging and heavy refurb bridging of £50,000 to £500,000 on a first charge, with further drawdowns as works progress, up to 65% LTV, and accepts first-time property investors.
• Octane Capital lends from £175,000 to £15 million for up to 24 months, at up to 75% of value on day one plus 100% of refurbishment costs, monitored by an asset manager, for UK borrowers with clean credit.
• PMJ Capital lists conversion and refurbishment loans up to 85% loan to cost for up to 24 months, writing unregulated loans only.
• Rocket Bridging lends from £25,000 with no stated maximum, advancing up to 75% of the lower of purchase price or market value, and after the works a further loan of up to 70% of the uplifted value or 100% of works costs, whichever is lower.
• Roma Finance includes light refurbishment in its RomaFLOW bridging range, from £75,000 to £3 million for up to 24 months at up to 75% LTV, in England, Scotland and Wales.
• Signature Property Finance lends from £100,000 on light and heavy refurbishment, up to 75% of purchase price or day-one value plus 100% of works costs, for up to 18 months on a first charge.
• Westwood Capital Finance includes refurbishment in bridging loans of £100,000 to £2 million for 3 to 24 months, up to 75% of value, and says there are no early repayment penalties.

Most lenders pay the purchase element on day one and the works element in stages. Before each release, a surveyor or asset manager checks the work done so far. Colenko uses a monitoring surveyor to confirm each phase, Octane uses an asset manager rather than a quantity surveyor, and Lendhub describes a light-touch asset manager drawdown. Black & White Bridging caps each drawdown at £250,000.

In practice that means:

• You fund the first works yourself in many cases, and are reimbursed once they are checked. Ask whether the lender pays in advance or in arrears.
• Each drawdown takes time to inspect and pay. Build that into your contractor’s payment schedule.
• Interest is often rolled up or retained, so it is added to the loan instead of paid monthly. Black & White, Glenhawk and Lendhub publish rolled interest on their refurbishment products.

Lenders combine a day-one advance against the property’s current value with an amount for works, then check the total against the value once the works are done. Here is the arithmetic, using a common published structure of 75% of value on day one plus 100% of works:

Our guide to loan to value explains how lenders measure these ratios.

Every lender above asks how you will repay. The two usual exits are selling the finished property or refinancing onto a buy-to-let or commercial mortgage. Plan the refinance before you buy: the new lender will value the finished property and size its loan on that value and the rent, not on your hopes.

• Works overrun on time and cost, which adds rolled interest and can push you past the term.
• The value after works comes in lower than expected, which cuts the refinance.
• Planning or building regulations sign-off is delayed, which delays the sale or refinance.

Tax matters too. HMRC’s VAT Notice 708 says the renovation or alteration of residential premises can be reduced-rated at 5% if they have not been lived in during the 2 years immediately before the works start, and a conversion that changes the number of dwellings can also be reduced-rated. The conditions are detailed, and Capzy does not give tax advice.

Capzy is a credit broker, not a lender, and the lender pays us when a facility completes. You can check your funding options with a soft search that does not affect your credit score. A lender’s full application may use a hard search, and all funding is subject to status and lender criteria.