Refurbishment bridging funds the purchase of a property and the work needed to make it lettable, saleable or mortgageable, then comes out when you refinance or sell.
It is the workhorse product for UK property investors. A high street lender wants a habitable building in reasonable condition on day one. A refurbishment bridge does not, because it is underwritten against what the property will be worth once the work is finished.
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Light and heavy refurbishment
Lenders split refurbishment into two camps and they price, underwrite and monitor them differently. Knowing which side your project sits on before you speak to anyone saves weeks.
| Point | Light refurbishment | Heavy refurbishment |
|---|---|---|
| Typical work | Kitchens, bathrooms, rewiring, replumbing, new boiler, windows, decorating, new flooring, garden | Structural alterations, extensions, loft and basement conversions, removing load bearing walls, change of use, conversion to flats or an HMO |
| Planning and building regulations | Usually neither, or building regulations only | Planning permission or permitted development, plus building regulations sign off |
| Footprint | Unchanged | Changed, extended or subdivided |
| Underwriting | Lighter touch, often a single valuation | Fuller appraisal, schedule of works scrutinised, monitoring surveyor on larger schemes |
| Pricing | Lower, closer to standard bridging | Higher, reflecting build risk and a longer term |
| Where it shades into development finance | It does not | Ground up work or a full conversion of a large building is usually development finance rather than a bridge |
Where lenders draw the line
There is no single industry definition and the boundary shifts from lender to lender. In practice four questions decide it.
- Is the structure being altered? Anything load bearing, anything that changes the roofline, anything that adds or removes floor area pushes the project into heavy.
- Does it need planning permission? If yes, treat it as heavy. If it is permitted development, get the prior approval or a lawful development certificate in place, because a lender will ask for it.
- Is the use changing? A commercial unit becoming flats, or a house becoming an HMO, is a change of use question before it is a building question.
- How big is the works budget against the purchase price? Several lenders use a percentage threshold. Once the works spend passes a set proportion of the purchase price, the case moves to the heavy product regardless of what the work involves.
Do not describe a heavy project as light
It comes out at valuation every time. The case then has to be recut to a different lender on different terms, several weeks into a timetable that had no slack. Describe the work accurately at the outset and the product is matched correctly first time.
How the money is released
A refurbishment bridge is normally two parts: a day-one advance against the property as it stands, and a separate works pot released as the job moves forward.
- Day one advanceFunds the purchase, or releases equity if you already own the property. Sized against the current value in its existing condition.
- Works released in arrearsOn most light and mid sized projects the lender reimburses completed stages rather than funding them in advance. You pay the contractor, then draw down. Plan your cash flow for that gap, because it catches people out.
- Staged drawdowns with inspectionOn heavier schemes a monitoring surveyor inspects before each release and certifies the work done. There is a fee for each visit and it should be in your appraisal.
- Final valuationOnce the work is signed off, a revised valuation establishes the end value. This is the number your exit is built on.
- RedemptionThe bridge is repaid in full from the refinance or the sale.
Unmortgageable property
A large slice of refurbishment bridging exists because mainstream lenders will not advance against property in certain conditions. The usual triggers are:
- No working kitchen or no working bathroom
- No functioning heating, or an unsafe electrical installation
- Severe damp, rot, subsidence or structural movement
- Fire or flood damage
- Non standard construction, or a property that has been empty for a long period
- A short lease below the threshold a term lender will accept
None of those stop a bridging lender. What they need is a clear schedule showing how the defect is cured, and a valuer’s view of what the property is worth once it is.
How much you can borrow
Two measures apply and the lender works to the lower of the two.
- Against the property as it is today. This sets the day one advance and is expressed as a percentage of current value, or of purchase price where that is lower.
- Against the gross development value. The day one advance plus the full works facility is capped as a percentage of the finished value. On a project where the uplift is strong, this is the constraint that binds.
Some lenders will fund the whole works budget where the total still sits inside the end value cap. Others expect a contribution. The 85 per cent LTV bridging loan page covers the higher leverage end of the market, and the bridging loan cost calculator shows what a facility costs across different terms.
What lenders want to see
- A costed schedule of works. Room by room or trade by trade, with figures. A one-line budget is the quickest way to stall an application.
- A realistic timescale. Then add contingency. Terms are short and running past the end date is expensive.
- Contingency in the budget. Ten per cent is a sensible starting point on a light refurb and more on heavy work. Lenders notice when it is missing.
- Your contractor. Who is doing the work, what they have done before, and whether they are insured.
- Evidence of the end value. Comparable sales or lettings for the finished product, not for the property as it stands.
- Planning and building regulations status. Consents already granted, or a clear route to them.
Getting out of the bridge
The exit matters more than the rate. A refurbishment bridge is a bridge to something, and the lender underwrites that something as closely as it underwrites the property.
| Exit | Best suited to | Watch out for |
|---|---|---|
| Buy to let refinance | Investors keeping the property, the classic BRRR model | Lender seasoning requirements before they will lend on the uplifted value, and whether the rent covers the stress test |
| Sale | Flips and trading projects | Build a genuine marketing and conveyancing period into the term, not just the build period |
| Commercial or semi commercial mortgage | Conversions and mixed use schemes | Term lenders vary widely on mixed use, so check appetite before you start work |
| Refinance onto a portfolio facility | Landlords with several properties finishing around the same time | Timing, because all the works need signing off before the facility completes |
Model the whole cycle before you commit. The BRRR calculator runs purchase, works, end value and refinance together so you can see whether the money actually comes back out.
Refurbishment bridging FAQs
What counts as light refurbishment?
Work that leaves the structure and the use of the building alone. New kitchens and bathrooms, rewiring, replumbing, a boiler, windows, flooring and decoration sit on the light side. The footprint does not change and planning is not required, although building regulations can still apply to electrical and heating work.
Can I borrow 100 per cent of the refurbishment costs?
Some lenders will fund the full works budget provided the day-one advance and the works facility together stay inside their cap against the finished value. Whether that works on your project depends on how much uplift the scheme generates. Where the numbers are tighter, a contribution is expected or additional security is used.
Is refurbishment funding paid up front or in arrears?
Usually in arrears on light and mid-sized jobs. You pay for a stage, the lender checks it, then that tranche is released. On heavier schemes a monitoring surveyor inspects and certifies before each drawdown. Either way you need working capital to cover the gap between paying the contractor and receiving the money back.
What happens if the work overruns?
Speak to the lender early. Most will look at an extension, although it carries a fee and interest keeps accruing. The expensive outcome is hitting the end of the term with the work unfinished and no agreement in place, because default interest sits well above the facility rate. Contingency in both the budget and the programme at the start is the practical protection.
Can I live in the property while it is being refurbished?
Not on a facility we arrange. Where the borrower or an immediate family member occupies the property, the loan becomes a regulated contract. We arrange non-regulated, business-purpose finance only, so our refurbishment bridging is for investment property, property held in a limited company, and trading projects.
Do I need experience to get a refurbishment bridge?
Not for a light refurbishment. A first-time investor with a sensible schedule of works, a competent contractor and a credible exit is fundable. Heavy refurbishment is a different conversation. Where the investor has no track record, the usual answer is a named contractor or project manager who does.
Talk to us about your project
Send us the schedule of works and the end value
With the purchase price, the works budget and a view on what the finished property is worth, we can tell you quickly which lenders fit and what the facility would cost across the term you need.
Related pages
- Bridging loans and bridging finance
- Auction finance
- Buy, renovate, rent, refinance explained
- Commercial to residential conversion finance
- 85 per cent LTV bridging loans
Bolton Business Finance Ltd is not authorised or regulated by the Financial Conduct Authority. We arrange non-regulated, business purpose commercial finance only. Any property used as security is at risk if the loan is not repaid.