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Property investors looking to fund purchases that require a light refurbishment have received some positive news, with one of our lending partners announcing a series of enhancements to its bridging finance proposition.
The changes include higher loan-to-value (LTV) limits, reduced pricing, and simplified underwriting requirements, all designed to make bridging finance more accessible and efficient for investors.
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90% LTV for Lending for Refurbishment Costs
One of the most significant updates is the increase in day one lending. Investors can now access up to 90% LTV.
For investors undertaking light refurbishment projects, this could reduce the amount of capital required upfront, helping to improve cash flow and potentially allowing investors to take on additional opportunities.
You may borrow 100% of the refurbishment costs if the total LTV does not exceed 90% of the current valuation or 75% of the post works value, whichever is lower.
This product is perfect for run-down properties in need of light refurbishment. Equally, it’s suitable for small HMO conversions and is a great way for investors to maximise their leverage.
Light refurbishment is classed as any works which are non-structural (with the exception of loft conversions) and do not require any changes in planning. For example, a new kitchen and bathroom, decorating, or minor remedial works.
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Example
An investor identifies a property valued at £200,000 that requires light refurbishment, including a new kitchen, fresh decoration, and minor remedial works, with a total budget of £30,000.
The anticipated post-works value following completion of the works is £300,000.
Maximum loan calculation:
| Property value | £200,000 |
| Costs of works | £30,000 |
| Post works value | £300,000 (a £70,000 profit excluding financing costs) |
| 90% of purchase price | £180,000 (the initial loan provided by the lender) |
| 75% of post works value | £225,000 (The valuer would be asked to assess the post works value of the property, as the lender would take 75% of this to ensure the property could be refinanced onto a BTL mortgage to repay the bridging loan) |
As the £180,000 loan is below 75% of the post-works value of £225,000, the investor can borrow the full £180,000.
| Loan amount | £180,000 |
| Investor deposit | £20,000 (10%) + the borrower will need to have the £30,000 towards the cost of the works |
By comparison, with a traditional lender offering 75% LTV, the investor would need to provide a deposit of £50,000 plus the £30,000 for the costs of works.
With lending available at 90% LTV, the required deposit reduces to just £20,000, leaving the investor with an additional £30,000, which in this case can be used for the cost of works.
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Easier Access Through Simplified Underwriting
The lender has also made some great changes to their general bridging proposition.
Several requirements have been removed or simplified, including:
- No previous experience required for commercial bridging applications, subject to a satisfactory exit strategy.
- More flexible criteria for heavy refurbishment projects, with first-time developers now potentially considered on a case-by-case basis.
- Removal of Schedule of Works requirements for residential bridging.
These changes should help reduce application complexity and speed up the funding process for many borrowers.
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How can Advocate Finance help?
If you have any projects which may benefit from these bridging finance enhancements, please get in touch.
We provide a FREE assessment on all our services.
Please contact me directly for more information, or use the Get in Touch With Us Today feature at the bottom of this page.
