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Refurbishment Finance
A refurbishment loan is available to property investors, landlords and developers looking to upgrade their residential, commercial or mixed-use investment asset before renting it out or selling it at a higher value. Within this area of funding, lenders will look to base their total loan against the end gross development value and achieve up to 90% Loan-to-Cost.
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​These facilities can be made available to works that don’t require any permission, those where the permission fit within Permitted Development Rights (PDR) or those that require full planning consent. If the works require planning, you will typically need this to be granted prior to the loan completion.
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Lenders have various ways of deciding whether your works are considered light, medium or heavy. As an example, Lender A states that medium works are those that carry a build cost of 51%-100% of the current value, i.e. on a purchase price of £200,000, the works would be between £102,000 - £199,999. Whereas Lender B states that medium works are sub 75% of the current value and light works are sub 25% of the current value i.e. the build works are between £50,000 - £150,000. You can see how this variation in credit policy can cause issues in the details below.
Light Refurbishment
Typically these works do not require planning permission and are internal changes only. Nothing structural will be permitted. Your typical build spend will be less than 50% of the current value and in many cases, these clients will also fund the works themselves. This not only saves on the need of a monitoring surveyor but you can also benefit from up to 85% Loan-to-Value day1!
Medium refurbishment typically allows for greater works being done due to its increased cost spend of up to 100% of the purchase price. These works can include items within PDR such as single story extensions and sometimes items requiring planning permission such as a loft extension (some consider this light refurbishment on a case-by-case basis).
Medium Refurbishment
Heavy Refurbishment
As the name suggests, the works involved hear are usually always needing planning permission, and will be extensive. Most lenders deem heavy refurbishment to be any deal where the build cost is greater than 100% of the current value.
Works usually involve things such as double storey extensions, both rear and to the side, can involve loft conversions, additional structures within the garden and even a basement dig! Many lenders we work with will allow projects requiring part demolition of the existing build, up to their only being one original wall left! The benefit is that unlike a development loan, a refurbishment loan doesn’t have an exit fee and usually carries a cheaper rate!