Refurbishment Finance
Refurbishment Finance
Is the property not mortgageable due to its condition? Does it need a full refurbishment before selling the property? Then we can help.
It may need decoration, a new bathroom, kitchen, suffer from damp or needs rewiring. Do you want to add an extension or convert the basement or loft? Then we have lenders for you.
Do you want to convert single units to multiple units, commercial to residential, a single let to an HMO or a new build that requires completion?
We will guide you through the various options available to you whilst you build your portfolio.
Case Study
Situation
We were approached by a new client who had agreed to purchase a terraced property. Another broker had arranged a BTL mortgage and when the valuation was received it was not mortgageable.
The electrics were dangerous, it had damp, kitchen units were missing and the bathroom suite was from the 60s.
The valuer felt there was no rental demand for a property in this condition.
Our client was stressed as he knew the potential and was in danger of losing the property.
Our Response
From our lender panel we chose one who would instruct the solicitors on day one and had a fast-track legal process.
It was a limited company purchase and there was no debenture or independent legal advice for the personal guarantee. This reduced costs to the client and speeded the legal process up.
Whilst the valuation was being done the legals were in progress and when it came back with a satisfactory existing valuation and after works, we were able to complete within a week.
We obtained an 85% bridging loan based on the purchase price and the lender’s fee was added to the loan.
Result
The refurbishment took three months and after two we applied for a remortgage to a BTL lender who would refinance within six months of ownership.
Our client arranged to meet the valuer and as it was to a high standard they received a higher valuation and rental income.
The BTL mortgage completed within four months which saved them approximately five months bridging interest.
They were able to withdraw most of the refurbishment funds as the BTL mortgage was based on the end value.
If you need more information on Refurbishment Finance contact us on 01565 654005
REFURBISHMENT FINANCE QUESTIONS
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What type of property can I get a refurbishment loan on?
We have lenders that can arrange refurbishment finance on buy to let property, retail, industrial and office investments.
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How long is the term of the loan?
The loan term will vary depending on the project and time to complete. It is usually 12 – 18 months depending on the work involved.
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What is the interest rate for the loan?
The interest rate for the loan will depend on various factors, such as the loan amount, loan term, type of works and the borrower’s creditworthiness.
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What is light refurbishment?
Light refurbishment generally involves minor upgrades to a property.
These include redecoration (e.g. painting, plastering, or laying flooring) or the replacement of fixtures and fittings (e.g. a new kitchen or bathroom).
It also covers damp proofing, electrics and central heating. It does not usually cover any structural work such as extensions, removal of load bearing walls. It may include loft conversions with some lenders.
If planning is required it is usually heavy refurbishment that you need with the exception of some HMO conversions.
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What is heavy refurbishment?
This type of finance is usually when there is a structural change to the building such as an extension, loft or basement conversion.
It also covers a change of planning use although with some lenders this may be covered by a light refurbishment product depending on the planning and type of work.
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How much can I borrow on a light refurbishment loan?
With most lenders it is up to 75% of the lower of the valuation or purchase price.
Some lenders will base it on the valuation if greater and others will also give you a contribution towards the refurbishment costs which can mean you get up to 85% of purchase price at completion.
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How much can I borrow on a heavy refurbishment loan?
If the refurbishment is classed as heavy you can get up to 75% of the day one value/purchase price and up to 100% of the refurbishment costs depending on the amount required, your experience and the amount of profit in the project.
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Will the refurbishment works be monitored?
A lender will usually send a valuer or asset manager around during the term of the project.
If you are borrowing the refurbishment costs then these inspections will be more regular as they will release the funds from the refurbishment loan to you
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How do I repay a refurbishment bridging loan?
It will be the sale of the property or a refinance to the same or different lender on a long term loan which can be against the end value once the works have been completed.