Refurbishment bridging loans

What is a refurbishment bridging loan?

A refurbishment bridging loan is a short-term, secured loan that funds the purchase (or refinance) of a property and the cost of improving it, before you sell or refinance onto a longer-term mortgage. Unlike a standard mortgage, which needs a property to be habitable and mortgageable from day one, refurbishment bridging loans are designed specifically for properties that aren't, an auction buy with no kitchen, a flat above a shop, a house that's been empty for years.

Terms typically run from a few months up to 24 months, interest is usually rolled up rather than paid monthly, and the lender looks at the deal rather than your income: the property's current value, the cost and scope of the works, and, critically, the Gross Development Value (GDV), which is what the property should be worth once the refurbishment is complete. The stronger your GDV and exit plan, the more competitive the terms you're likely to be offered.

Refurbishment bridging loans are commonly used by:

• Landlords and investors running a Buy, Refurbish, Refinance (BRR) strategy
• Auction buyers who need to complete within 28 days on an unmortgageable property
• Developers converting a house into flats, an HMO, or a commercial-to-residential scheme
• Homeowners bridging the gap while renovating before moving in or selling

Light vs heavy refurbishment bridging loans

Not all refurbishment projects are funded the same way. Lenders split refurbishment bridging finance into two broad tiers, and which one your project falls into affects your rate, your LTV, and how (or whether) the works themselves get funded.

A light refurbishment bridging loan is the more straightforward of the two, if you're doing a cosmetic refresh with no structural change, this is almost certainly the product you need, and it's usually the cheapest and fastest option available. Heavy refurbishment finance costs more because the lender is taking on the risk that the works get finished, not just that the property holds its value.

If you're not sure which category your project falls into, that's exactly the kind of thing our team sorts out on a first call, get in touch and we'll tell you straight away.

Refurbishment bridging loan rates

Refurbishment bridging loan rates depend on the scale of the works, the loan-to-value you need, the strength of your exit strategy, and how experienced you are as a developer or investor. As a guide:

A few things that consistently move the rate you're offered:

• Loan-to-value: the lower the LTV, the sharper the rate
• Exit strategy: a pre-agreed sale or refinance route reduces perceived risk
• Experience: first-time developers may be offered slightly higher rates or lower leverage than those with a track record
• Additional security: offering another property as security can unlock higher LTVs and, in some cases, 100% funding

These figures are indicative and move with the wider lending market, so always check current rates before budgeting a project around them, our refurbishment bridging loan calculator gives you a live, no-obligation estimate.

How much can you borrow?

Refurbishment bridging loans are usually structured around three figures:

• Day-one value: what the property is worth in its current condition, which typically sets your initial advance (up to around 75% LTV for light refurbishment, 70% for heavy).
• Works cost: for heavier projects, lenders will fund up to 100% of the build cost, but release it in stages as work is completed and signed off, rather than upfront. You'll usually need to fund the first stage yourself before the lender reimburses you.
• Gross Development Value (GDV): the projected value once the works are finished. The total loan is capped against this, usually at around 70% of GDV, to give the lender a safety margin if costs overrun or the market moves.

If you have an additional property to offer as security, some lenders will fund up to 100% of a project. Every lender's appetite is slightly different, which is where working with a specialist broker earns its keep, the same project can be priced very differently depending on how it's presented.

Refurbishment finance calculator

Before you commit to a project, it helps to know roughly what it will cost to fund. Our refurbishment finance calculator lets you enter the property value, your refurbishment budget, and your expected end value to get an instant, indicative breakdown of how much you could borrow, at what rate, and what the total cost of the loan is likely to be.

Use it to model different scenarios, a lighter, faster refresh versus a fuller structural project, before you speak to a broker, so you walk into that conversation already knowing your numbers.

How the process works

1. Tell us about your project. Property, works, budget, and your exit plan (sale or refinance).
2. We match you to the right lender. Light or heavy refurbishment, bridging or development finance, we'll tell you which structure fits, not just sell you what we have.
3. Valuation and underwriting. The lender assesses the property and, for larger projects, may involve a monitoring surveyor to oversee staged drawdowns.
4. Offer and legal work. Once approved, your solicitor handles the legal process alongside the lender's.
5. Funds released. For light refurbishment, funds are typically released in one go. For heavy refurbishment, the initial advance is released first, with further tranches paid as each stage of work is inspected and signed off.

What is a schedule of works?

A schedule of works sets out exactly what you're going to do to the property, what each part will cost, and in what order.

For light refurbishment, it can be brief. For heavy refurbishment, it's one of the most important documents in your application.

Here's why. When a lender funds works in staged drawdowns, they release money against completed stages. The schedule of works is the map they release it against. No schedule, no clear stages, and no clear stages means slower drawdowns.

A solid schedule of works usually includes:

• A room-by-room or task-by-task breakdown of the works
• The cost of each item, split into labour and materials
• The order the works will be carried out in
• A realistic timeline for each stage
• A contingency, typically 10-15%, for the things that always come up

The more detailed and credible your schedule, the smoother your drawdowns tend to be. A vague one-liner, "full refurb, £60,000", tells a lender nothing and slows everything down.

On larger projects, a monitoring surveyor (sometimes a quantity surveyor) checks your schedule against the work actually done before each tranche is released. Get the schedule right at the outset and those inspections are a formality. Get it wrong and every drawdown becomes a negotiation.

The question isn't whether you need a schedule of works. On any staged-drawdown facility, you do. The question is whether yours is detailed enough to keep your funding moving.

What can you use a refurbishment bridging loan for?

How to find the best refurbishment bridging loan

The best refurbishment bridging loan for your project isn't automatically the one with the lowest headline rate, a cheap rate attached to the wrong structure can cost you far more in delays than a sharper rate ever saves. A few things worth checking before you commit:

• Does the drawdown structure match your build programme? If tranches don't align with when your contractors need paying, you'll be funding gaps from your own cashflow regardless of the rate.
• Are there exit fees? Some lenders charge a fee on redemption as well as arrangement fees, factor the total cost of the loan in, not just the monthly rate.
• How is the LTV calculated, against day-one value or GDV? This affects how much you can actually draw down, and when.
• What's the lender's experience with your type of project? A lender comfortable with HMO conversions may be far more competitive on that deal than a generalist bridging lender, even at a similar headline rate.
• How fast can they actually complete? If you're buying at auction, speed of completion matters as much as price.

A broker who works across multiple lenders can compare all of this for you in one conversation, rather than you approaching lenders one at a time.

Eligibility criteria

Worked example

Frequently asked questions