Bridging finance can be used for the refurbishment of residential and commercial property. There are 2 types of bridging finance for refurbishing property, light refurbishment loans and heavy refurbishment loans. Heavy refurbishment is structural, needs planning or involves a change of use to the property whereas light refurbishment does not.

Light refurbishment loans

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Light refurbishment loans are available to individuals, companies, pensions and trusts. The loan is secured on property in the UK. The applicant does not need to have experience of completing previous light refurbishments. The work may be completed by the applicant or by a contractor of the applicants choosing.

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Who can secure a light refurbishment loan?

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Light refurbishment loans are available to individuals, companies, pensions and trusts. The loan is secured on property in the UK. The applicant does not need to have experience of completing previous light refurbishments. The work may be completed by the applicant or by a contractor of the applicants choosing.

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What work is permitted under a light refurbishment loan?

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  • General redecoration; painting, plastering, new electrics, new flooring
  • Replacement of bathrooms and kitchens
  • Rendering to the outside of the property
  • New windows and doors
  • Replacement radiators
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Which lenders will lend light refurbishment loans?

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Light refurbishment lenders include bridging finance lenders and specialist buy to let lenders that offer a hybrid light refurbishment buy to let loan.

Bridging finance lenders will typically lend up to 75% of the property value, some lenders will also allow you to borrow the cost of the works to the property. The bridging finance then needs to be repay using a long term but to let or residential loan or to be repaid through the sale of the property.

You should be careful of the 6-month mortgage rule when trying to refinance property within 6 months of purchasing it.

A light refurbishment buy to let loan will allow you to purchase the property using the current value and current market rental value. Once the works have been completed the lender will send out an independent surveyor to the property who will give their opinion of the current valuation (post works) and the new market rent for the property. Additional lending is then advanced base don the post work valuations.

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What are the rates for a light refurbishment bridging loan?

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  • Rates from 3.99% per annum (0.33%) per month.
  • Lenders fee from 1% and typically up to 2%
  • Exit fees from 0% to 2%
  • Maximum loan to value of 75%
  • Some lenders will also advance the cost of the works
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Heavy Refurbishment

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A heavy refurbishment loan is a short-term loan secured on property in the UK. Both residential and commercial properties are acceptable as security. A heavy refurbishment loan involves work that requires planning, is structural or that will result in a change of use to the property.

An example of a heavy refurbishment loan would be the complete refurbishment of a 4 bed residential (C3 planning use) property into a 5 bed house of multiple occupation (C4 planning use) property.

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Who can secure heavy refurbishment loans?

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Heavy refurbishment loans are available to individuals, companies, pensions and trusts. The lending is secured on a residential or commercial property in the UK. The applicant should have previous experience of completing either a heavy or light refurbishment.

Lenders will want to know which contractors are being used to complete the work and will carry out light due diligence on the contractor to check for their ability to complete the work. If you plan to do the work yourself then you should have direct experience of building work through your main day to day job.

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What work is permitted under a heavy refurbishment loan?

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  • All works that fall under light refurbishment
  • Structural changes including retaining walls, extensions or addition of extra rooms
  • Any work that requires planning permission even if permitted development
  • Any work that will result in a change of use for the property including commercial to residential or family use to HMO use.
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Which lenders will lend on a heavy refurbishment loan?

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Heavy refurbishment lenders are specialist bridging loan or short-term loan lenders. They include, some building societies and high street commercial banks, private banks and specialist bridging lenders either funded by deposit as in the case of some challenger banks or funded by family money.

Bridging finance lenders will typically lend up to 75% of the property value, some lenders will also allow you to borrow the cost of the works to the property. The bridging finance then needs to be repay using a long term but to let or residential loan or to be repaid through the sale of the property.

You should be careful of the 6-month mortgage rule when trying to refinance property within 6 months of purchasing it.

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What are the rates for a heavy refurbishment bridging loan?

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  • Rates from 4% per annum
  • Lenders fee from 1% and typically up to 2%
  • Exit fees from 0% to 2%
  • Maximum loan to value of 75%
  • Some lenders will also advance the cost of the works
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What paperwork is required for a heavy refurbishment bridging loan?

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  • Application form (broker to complete)
  • Proof of ID and address
  • Bank statements to show deposit funds and funds to cover cost of works
  • Build schedule to include list of works, timescales and costings
  • Evidence of your planned exit (sale or refinance)
  • Details of the contractors being used to complete the work
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What does a bridging finance broker do?

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A bridging finance broker specialises in securing bridging loans for clients. They will have access to the whole of the market and will negotiate the best terms including the rate and the lenders fees. A bridging finance broker will handle the entire application process and advise on every aspect of securing the loan. Your broker will also arrange the exit finance, if required.

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Fox Davidson commercial finance is a specialist division of Fox Davidson. We specialise in securing commercial, bridging and development finance loans on property in the UK. Our clients include individuals, corporations, pension funds and trusts based both in the UK and offshore.

Our minimum loan size is £200,000 and we have funding available up to £100 Million for high-net -worth individuals and corporations.

In our first discussions with you we will complete a bridging loan fact find which gathers information on the borrower including assets, liabilities, income and expenditure. We will also gather details on the proposed security, the works involved, does it need planning? what issues might arise? Your contingency funding and other matters affecting the completion of the development.

We will work with you to calculate the actual loan amount you will require, both on day 1 and the loan required for the works, if applicable.

We will also look at the length of time you require the loan for and will ensure the term allows for the works to be completed and for you to sale or refinance to repay the bridging loan.

Finally, we will look at the planned exit being used to repay the bridging finance and will ensure it is watertight. The costs for extending bridging finance are hefty and so proper planning upfront is essential and we will help to ensure our clients are in a good position to complete the purchase, complete the works to the property and then to repay the loan at the end through sale of refinance.

To discuss your refurbishment loan finance requirements with a commercial mortgage broker at Fox Davidson, please contact us.