Heavy Refurbishment Mortgage Finance

What is Heavy refurbishment?

For a property to be granted a mortgage, it must be habitable. It has to have a fully functioning bathroom and kitchen. It also has to be wind and water tight. For the property to let to a tenant then lenders will require it to be in a “lettable condition” which normally is a higher standard than just “habitable”.

If a property needs re-plastering, redecorating, rewiring or a newly fitted kitchen or bathroom, this can be arranged through a light refurbishment mortgage. The project cannot involve any changes of use or require planning permission.

However, some refurbishment projects are more involved. If the works require planning permission changes, for example, converting offices into flats or any structural works this would be considered a Heavy refurbishment project and would require heavy refurbishment mortgage finance which is typically provided by specialist Banks, Bridging Finance Lenders and development lenders.

Heavy refurbishment mortgage finance is a short term funding line. It enables property developers and investors to fund both the purchase of a property needing work, and the funds to carry out the heavy refurbishment.

Heavy refurbishment mortgage finance are often seen as a more expensive option when compared to a traditional mortgages. But they have proved a popular solution to many property developers and investors who want to make money from refurbishing properties.

Light refurbishment mortgages are also available through many of our lenders.

Where a heavy refurbishment mortgage finance is required, the lender will want to see a ‘schedule of works’. This is a breakdown of all the costs involved in the project. They will also want to know how long the project is predicted to take. A valuer will comment on whether the intended budget is realistic and if the time scale is achievable. They often comment on the value of the property on day one (before the work has been carried out), and then what the Gross Development Value (GDV) is. This is also known as the post refurbishment works value.

What experience will I need for a heavy refurbishment project?

When it comes to arranging heavy refurbishment mortgages, the lenders will want to see evidence of past projects. This is to ensure they have been carried out within the allotted time frame and within budget. They will also want to see evidence of any previous loans being paid off either by selling the property or refinancing to another mortgage.

The intended method for repaying the loan must be clearly outlined at the start of the application. A lender will insist on this. Repayment would usually be via sale or refinance. If the property is being sold, the lender will want to see whether the estimated sale price, demand and time scales are realistic to ensure the loan is paid off in full before the end of the term. If the exit route is via refinance, the borrower will need to provide evidence that they can obtain a mortgage elsewhere, usually by way of an ‘agreement in principle’ from another bank.

Heavy refurbishment mortgage finance are often seen as a more expensive option when compared to a traditional mortgages. But they have proved a popular solution to many property developers and investors who want to make money from refurbishing properties.

Light refurbishment mortgages are also available through many of our lenders.

Frequently Asked Questions

A lender will require the standard information you provide for any mortgage, credit or loan application but in addition, will want to see information on the heavy refurbishment project. 

The level and detail depending on the scale and complexity of the project but typically will consist of:

  • Schedule and specification of works – This will be referred to the valuer to comment as part of the valuation process
  • Is planning permission required
  • Past experience / Details of the construction Team

This depends on the lenders, but we have access to lenders that can lend for heavy refurbishment projects up to £25 million and should cover most projects in the UK.

The minimum loan amount is £100,000 if you do not require the project works to be funded by the lender.

If you require the lender to fund the project works, then the minimum loan amount is £250,000, and the loan process involves monitoring surveyors who visit the works as they are carried out due to this, lenders require the loans to be of a larger size.

The intended method for repaying the loan must be clearly outlined at the start of the application. A lender will insist on this. Repayment would usually be via sale or refinance.

If the property is being sold, the lender will want to see whether the estimated sale price, demand and time scales are realistic to ensure the loan is paid off in full before the end of the term.

If the exit route is via refinance, the borrower will need to provide evidence that they can obtain a mortgage elsewhere, usually by way of an ‘agreement in principle’ from another bank.

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