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Heavy property refurbishment loans explained:
These loans are available for what lenders class as either light refurbishment works or heavy refurbishment works. On this page, we are going to specifically focus on heavy refurbishment.
Property refurbishment finance is available for customers looking to renovate a property, in order for them to then hold it as a buy-to-let investment or to re-sell in order to make an instant profit.
Refurbishing and adding capital value to the property post works, is one of the best ways to maximise income and yields from property investment.
What is a Heavy Refurbishment property?
Heavy refurbishments will usually cost more than 15% of the property value. Best suited for extensive works such as, loft conversions and extensions that would require planning permission.
For a property to be granted a mortgage, it must be habitable. It has to have a fully functioning bathroom and kitchen and also has to be wind & water tight. For the property to be let to a tenant, 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 – This type of 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 finance, which is typically provided by specialist Banks, Bridging Finance Lenders & development lenders.
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.
Where a heavy refurbishment loan 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.
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 refurb. Will usually include the level and details of the project (depending on the scale) and complexity, but typically will consist of:
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. 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, known as an Exit Strategy; a lender will insist on this. Repayment would usually be via sale or refinance.
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Advantages of Heavy Refurbishment Loans
Disadvantages of Heavy Refurbishment Loans
Important Information
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
We are a credit broker not a lender.
Advocate Finance Ltd, registered at 55 Crown Street Brentwood, Essex CM14 4BD. Company Register number is 05579380. Authorised and Regulated by the Financial Conduct Authority. Our FCA registration number is 592830.
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We conduct both regulated and unregulated business and therefore not all products provided through us are regulated by the Financial Conduct Authority. We source mortgages and loans from a panel of lenders.
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Advocate Finance is a mortgage and finance brokerage firm that specializes in securing loans and mortgages for various types of properties, including single properties, large portfolios, commercial sites, and development projects. They assist clients regardless of credit history, circumstances, or legal ownership, aiming to provide tailored financing solutions