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Are you looking to refurbish a property and want a loan that covers 100% of the works costs? Continue reading to see how we could help you.
Market leading bridging lenders now offer competitively low rates whilst also funding 100% of the works, allowing you to maximise the value of your property. These loans tend to be classed as heavy refurbishment loans that fall short of development finance criteria.
For property investors looking for funding on light refurbishment projects read our post on Shawbrook’s marketing-leading product.
Heavy Refurb and Conversion Works
Examples of works that can be funded through these products include those involving structural changes, residential or commercial conversions, internal refurbishment, or work that may require planning permission and/or building regulation approval such as extensions and loft conversions.
Example Project
Conversion of a Commercial unit into 3 self-contained flats under permitted development.
Financial Details Purchase
| FINANCIAL DETAILS | |
| Purchase Price | £400,000 |
| Site Acquisition Costs (SDLT) | £9,500 |
| Site Acquisition Costs (Legal) | £2,500 |
| Build Costs | £100,000 |
| Contingency | £10,000 |
| Total Cost of Works | £110,000 |
| Grose Development Value | £700,00 |
| FUNDING REQUIREMENTS | |
| Period for Works (months) | 6 |
| Period to Sell/Refinance (months) | 4 |
| Day 1 Contribution from Developer | £100,000 |
| Day 1 Loan | £300,000 |
| Refurbishment Loan for 100% Build Costs | £110,000 |
| Total Facility Required (incl Financing) | £438,400 |
| FINANCING COST | |
| Arrangement Fee | 2% |
| Exit Fee | 0% |
| Interest Rate (per month) | 0.80% |
| Arrangement Fee | £8,768 |
| Interest Cost | £28,400 |
| Total Financing Costs | £37,168 |
| PROFITABILITY AND RISK ANALYSIS | |
| Profit on Costs (£) | £140,832 |
| Profit on Costs (%) | 28% |
| Loan to Value (day 1) | 75% |
| Loan to Costs (LTC) excl Financing Costs | 80% |
| Loan to GDV (LTGDV) incl Financing | 63% |
To summarise, you will need a 25% deposit on day 1 along with the stamp duty fees, legal costs and the initial funds needed to begin the works. Once the initial works are complete, the lender allows you to draw down on the next stage of funding and this is repeated until all works are complete.
This shows that including the interest roll up, the lender is providing an overall loan of 82% LTV. With an initial investment of £100,000 and overall profit on costs of £148,832, it shows that this strategy provides a fantastic return on investment.
To find out if we can help with your project, please get in touch for a free, no-obligation personalised quote.
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