The top 5 questions about refurbishment finance

Property refurbishment is a popular strategy for investors to add significant value to a property. However, transforming a tired property asset into a modern, profitable one requires a specialised financial solution. That’s where refurbishment finance comes in as it’s a type of short-term loan specifically designed to cover the costs of property renovation.

At Breeze Capital, we often speak with a range of clients, from first-time developers tackling their first project to experienced professionals looking for a fast, flexible funding partner. To help you understand, we’ve compiled the answers to the most common questions we receive.

1. What’s the Difference Between Light and Heavy Refurbishment Finance?

Understanding this distinction is the first step in choosing the right type of loan for your project. The key lies in the nature and scope of the work being carried out.

• Light Refurbishment Finance: This is for cosmetic, non-structural work. The property remains habitable throughout the process and does not require planning permission. Think of this as a property “facelift” or “refresh.”

  • Examples of light refurbishment:

    • Updating a kitchen or bathroom without changing the layout.

    • Repainting and redecorating.

    • Installing new flooring or windows.

    • Minor landscaping improvements.

• Heavy Refurbishment Finance: This is for more extensive work that involves structural changes or a change of use. The property may become uninhabitable during the work and often requires building control approval or formal planning permission.

  • Examples of heavy refurbishment:

    • Knocking down internal walls or adding an extension.

    • Anything that requires planning permission.

    • Changing the property from a single residence to multiple flats.

    • A commercial-to-residential conversion.

    • Major repairs to a roof or foundation.

    • Building a multi-storey extension.

While both types of finance are used for property renovation, they require different levels of due diligence and funding structure. At Breeze Capital, we can provide both but it’s crucial to be clear about your project’s scope from the start.

2. Do Refurbishment Loans Cover 100% of My Build Costs?

This is a critical question for all developers. The short answer is yes, a specialist lender like us here at Breeze Capital can provide 100% of the build costs, but this is always part of a larger, carefully calculated financial structure. We work on a staged funding basis, where funds for the build are released in tranches as the work progresses. This ensures you only pay interest on the money you’ve used.

Our loans are structured based on several key metrics to ensure the project is viable and secure for both parties:

• Up to 100% of the Build Costs: We can provide the full amount required for the renovation work, from materials to labour.

• Up to 85% of the Initial Open Market Valuation: If you already own the property, the loan can be based on its current value.

• Up to 95% of the Purchase Price: For properties you are buying specifically for refurbishment, we can fund nearly the entire purchase price.

• Up to 75% of the GDV (Finished Value): This is the final and most important check. The Gross Development Value (GDV) is the projected resale value of the property once the work is complete. The total loan amount (including both the purchase and build costs) cannot exceed this percentage of the final value.

This layered approach ensures that the project has a healthy profit margin for you and the loan remains secure for the lender. It also means you only need to provide a deposit, which is often a portion of the purchase price, while we fund the rest.

3. Can I Get a Refurbishment Loan for a Property with No Kitchen or Bathroom?

Absolutely. This is one of the primary reasons a developer uses refurbishment finance. A property that lacks basic amenities like a kitchen or bathroom is often considered “unmortgageable” by high-street lenders. This makes it an ideal investment opportunity for property developers who are comfortable taking on renovation projects.

A standard residential mortgage requires a property to be in a habitable state. Since a property with no kitchen or bathroom fails this test, it cannot be secured with a traditional loan. Refurbishment finance, however, is designed for exactly this situation. It allows you to purchase the property and then provides the funds necessary to install these essential amenities, along with any other required work. Once the project is complete, the property becomes habitable and can then be sold or refinanced onto a standard buy-to-let mortgage.

4. What Types of Refurb Projects Qualify for Finance?

The flexibility of refurbishment finance allows it to be used for a wide range of projects, far beyond a simple lick of paint. At Breeze Capital, we have experience funding a diverse portfolio of schemes. Here are some common examples:

• Commercial-to-Residential Conversions: Converting an old office building, a pub, or a retail unit into residential flats is a major trend in property development. This is a perfect fit for heavy refurbishment finance, as it involves a change of use and extensive structural work.

• EPC Upgrades and Green Refurbishments: With new EPC regulations and a growing focus on energy efficiency, many investors are looking to upgrade properties with better insulation, modern heating systems, or renewable energy sources. This type of work can significantly increase a property’s value and rentability, and refurbishment finance is an excellent way to fund it.

• Major Works to a Distressed Asset: Buying a repossession or a fire-damaged property can offer a great deal. Refurbishment finance provides the funds to carry out the extensive repairs and bring the asset back to life.

• HMO (House in Multiple Occupation) Conversions: Converting a single-family home into an HMO with separate rooms and shared facilities is a popular way to maximise rental income. This often involves structural changes and requires heavy refurbishment finance.

• Barn Conversions and Listed Buildings: These projects are complex and require specialist knowledge and funding. A lender with a track record in these areas can provide the necessary finance to navigate the specific challenges and regulations involved.

5. What is the Process, and How Quickly Can Funds Be Released for Refurbishment?

The process for securing refurbishment finance with a specialist lender like Breeze Capital is designed to be as fast and efficient as possible, especially when compared to a traditional bank.

Here’s a simplified overview of the process:

1. Initial Enquiry: You contact us with the details of your project. We’ll ask about the property, the scope of the work, the costs, and your proposed exit strategy.

2. Submission of Documentation: We’ll request key documents, including proof of identity, a detailed schedule of works, and a breakdown of your project costs. We’ll also need a professional valuation of the property’s current value and its potential finished value (GDV).

3. Heads of Terms & Legal: Once the numbers are agreed upon, we issue a formal offer. Our lawyers will then work with your lawyers to complete the legal due diligence.

4. Funds Released: The initial loan amount is released to purchase the property (if applicable). Then, as you complete each stage of the refurbishment, a monitoring surveyor will inspect the work, and the next tranche of funds will be released. This staged drawdown ensures you have the cash flow you need at every step.

The entire process, from initial enquiry to the release of the first funds, can often be completed in a matter of weeks, allowing you to move quickly and secure your deal.

Summary

Refurbishment finance is an invaluable tool for any property investor or developer looking to add significant value to a property. Unlike a standard mortgage, it can be used for properties in any condition, from minor cosmetic upgrades to major structural overhauls and commercial-to-residential conversions. A specialist lender like Breeze Capital can provide 100% of your build costs, structured around key metrics like the property’s purchase price, initial value, and its final resale value (GDV). This staged funding approach is designed to be highly flexible and efficient, ensuring you have the cash flow you need exactly when you need it.

For more information on how Breeze Capital can help you with your property requirements, please call us on 01244 565095

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