Light Refurbishment Loans

Refurbishment loans are a type of finance that can help investors and landlords purchase property that requires some form of renovation work before it is ready to be let or sold. They are typically short-term bridging loans that are designed to be repaid upon completion of the work and a subsequent sale or remortgage (typically to a BTL mortgage). There are specialist refurbishment buy to let mortgages available as well, acting as a hybrid between these types of loans and conventional mortgage products.

Light refurbishment loans are typically for work that doesn’t involve structural changes to a property, such as redecoration and improvements to fixtures, fittings and appliances. The work can be carried out either by the borrower themselves or by a contractor of their choosing. Typical work would include plastering, painting or laying flooring as well as replacing a kitchen and bathroom or installing new windows. These are usually the sort of projects that can be completed without the need for planning permission or building regulation checks.

The amount of money a person can borrow for this kind of work is typically up to 75% of the post-refurbishment value of the property. Lenders will take into consideration a number of things when assessing whether to approve an application including: the borrower’s income, credit history and the expected future value of the property after the refurbishment work is complete, as well as the cost of the work itself.

Getting the right refurbishment loan is a crucial part of any development project, but it’s not something that you should rush into without doing your research first. It’s important to understand the different types of loan available, and how they differ in terms of application criteria, interest rates and repayment schedules. There are also a range of fees associated with refurbishment financing which may affect the overall cost of the loan. These include arrangement fees, exit fees and interest charges.

While there are a number of specialist lenders who offer light refurbishment loans, it’s essential to shop around and compare the options to find the best deal for you. Interest rates vary and they can be serviced monthly, rolled up or part rolled-up. It’s also worth bearing in mind that the more extensive the refurbishment work, the higher the potential interest rate is likely to be.

Many borrowers will choose to pay for the bulk of their refurbishment work with cash, which is preferable in terms of interest rates and fees. If you have the funds to do this, it’s definitely a good option. If you don’t, you can still improve your chances of securing a refurbishment loan by being as transparent as possible with the lender and showing them a detailed plan of how the work will be undertaken. Lenders will need to be convinced that the renovations will deliver a return on their investment and it’s worth noting that lenders are more willing to lend to experienced developers who have a track record of delivering successful projects.