Refurbishment Finance: How to Get a Loan to Buy, Refurbish and Sell a Property

Investors and developers use property refurbishment finance to buy and refurbish a property before selling it for a profit.

Refurbishment projects are growing in popularity among investors and developers who want to generate income through property investment. When done right, purchasing a property to fix up and later sell can increase the sale value and provide a good return.

If you want to purchase and upgrade a property to increase its value but don’t have the money to complete your project, you might need a refurbishment loan.  

What is a property refurbishment loan?

Often referred to as a refurbishment bridging loan, a refurbishment loan provides you with the funding needed to refurbish a property before selling it. It is often used for smaller projects than property developments and offers short-term finance to carry out light or heavy refurbishments on your residential or commercial property. 

A refurbishment loan can help finance your property improvement project or cover the cost of buying a property and refurbishing it. You have to pay back the loan when you sell the property, so the aim is to make sure the property increases in value enough to cover the refurbishment costs and leave you with a profit. 

There are two kinds of property refurbishment loans, including:


Light refurbishment 

If the property only requires cosmetic changes or minor improvements, such as redecoration or a new kitchen or bathroom, you can use a light refurbishment loan to finance your project. Light refurbishment refers to anything that does not require planning permission or change the use of the property.   


Heavy refurbishment

You will need a heavy refurbishment loan if you plan to make structural changes to the property. Heavy refurbishments can include making significant changes, such as adding an extension or reconfiguring the property layout and removing interior walls. All heavy refurbishment projects require planning permission and must comply with building regulations. 

A property development finance product might be more appropriate for funding a large-scale project or a comprehensive renovation. For example, if you want to convert a building into a block of flats, development finance could be the most suitable option for you.


How much can I borrow?

The amount you can borrow with a refurbishment loan depends on your circumstances. Most lenders will assess your income, your credit history and the expected future value of the property. Refurbishment finance typically starts at 75% of the post-refurbishment value of the property. However, lenders will want you to meet their criteria before they approve your loan application. 


Does each lender have its own lending criteria?

Yes. As each lender has different terms and rules, the criteria will vary between lenders. To be eligible for a refurbishment loan, you need to fit the lender’s criteria and provide substantial paperwork. 

The eligibility criteria and necessary documentation may include the following:

  • You have experience in property refurbishment projects
  • You have equity in the property
  • You must be up to date with any mortgage payments
  • You must provide plans and costings of the refurbishment
  • You must provide an estimated projected future value of the property
  • You must provide an exit strategy – a plan for paying back the loan

If you are eligible and a lender approves your application for a refurbishment loan, you could receive funds in as little as a week or two. However, you can usually get an instant decision when you submit a refurbishment loan enquiry online. 

We should also mention that you may find it difficult to satisfy lenders if you are currently self-employed as it can be hard to prove your income, but there are still options available if you work for yourself.


What fees will I have to pay if I take out a refurbishment loan?

As with all property finance products, there are fees to pay when you take out a refurbishment loan. 

The fees associated with this type of finance can include:

  • Broker fee – only if you use one to find a lender
  • Arrangement fee – charged by the lender for arranging your loan
  • Valuation fees – a property valuation is required before and after the refurbishment 
  • Exit fee – some lenders charge an exit fee at the end of the loan

Remember, you have to pay interest on the money you borrow. As a general rule, the more complex the refurbishment project, the higher the interest rate. Your credit history also determines the borrowing costs, as does your current financial status. 


How do I get the best renovation loan deal?

We recommend you approach several lenders who specialise in renovation finance to find the best deal. You first need to find out how much you can borrow, then compare terms, interest rates and arrangement fees. The interest rate is one of the most important factors to consider when choosing a loan as it will have a significant impact on how much money you have to repay. 


Is there a convenient way to compare lenders? 

A quick and easy way to find lenders willing to offer you a refurbishment loan is to use our intelligent matching platform. The Pitch 4 finance platform gives you access to hundreds of lenders at the click of a button, saving you time and hassle sourcing the right loan for you. It also matches you with all the lenders that fit your requirements and guarantees you get the best deal. 

You can carry out the whole research and loan application process within our platform and get support from the Pitch 4 Finance team when you need it. All you have to do is submit a loan enquiry before our platform compares hundreds of lenders on your behalf and instantly matches you with lenders who will lend to you. 

If you would like more information about what we have to offer or you want to discuss your refurbishment loan options, contact a member of the Pitch 4 Finance team on 0800 7723 180. Alternatively, you can talk to us live via our online chat service.