Refurbishment Bridging Finance: Refurbishment projects often create a funding problem.

A property may need work before it meets the requirements of a long-term mortgage lender. However, the borrower may need to complete the purchase before those works can begin.

In 2021, refurbishment bridging finance offered one possible way to manage that timing gap.

This article examines the technical factors behind that lending route. It uses Shawbrook Bank’s 2021 refurbishment proposition as a historical example. Product terms mentioned here should not be treated as current lending terms.

At a Glance

Refurbishment bridging finance is short-term lending secured against property.

In 2021, it could be considered where a borrower needed to:

• Purchase a property requiring repairs.
• Complete an auction purchase quickly.
• Fund agreed refurbishment costs.
• Improve a property before refinancing.
• Move from short-term lending to a term mortgage.

The lender would usually assess the property, proposed works, costs, borrower experience and exit strategy.

The central question was not simply whether the work could be funded. It was whether the project could be completed and the bridging loan repaid within the agreed term.

What Was Refurbishment Bridging Finance?

A refurbishment bridging loan provided temporary property-backed finance for a purchase, renovation or conversion project.

It differed from a standard mortgage because it was designed for a shorter term. It could also be considered where the property was not yet suitable for long-term mortgage lending.

The finance could cover the property purchase, part of the refurbishment budget or both. The exact structure depended on the lender, the property, and the proposed work.

For a broader explanation of complex borrowing routes, read the Specialist Lending Guide for Mortgage Brokers.

What Types of Work Could Be Considered?

Lenders commonly separated refurbishment projects into light and heavy works.

Light refurbishment

Light refurbishment could include:

• Updating kitchens or bathrooms.
• Replacing flooring.
• Redecorating rooms.
• Repairing fixtures.
• Improving energy efficiency.
• Completing non-structural repairs.

These projects normally involved limited structural change.

Heavy refurbishment

Heavy refurbishment could include:

• Structural alterations.
• Extensions.
• Major conversions.
• Changes to the property’s use.
• Significant layout changes.
• Work requiring planning permission.
• Projects subject to building regulations.

More complex work generally required closer assessment. The lender could request professional reports, detailed costings and evidence of relevant experience.

How Did Lenders Assess a Refurbishment Case?

A lender would not assess the loan using the purchase price alone.

The review could consider:

• The property’s current condition.
• The purchase price and present value.
• The estimated value after completion.
• The schedule of works.
• Labour and material costs.
• Planning or building control requirements.
• The borrower’s financial position.
• Previous property experience.
• Available contingency funds.
• The proposed repayment route.

A clear application therefore needed more than a request for money. It needed a credible project plan.

A wide lender panel could help advisers identify which lenders were prepared to consider the property, works and borrower profile. Connect members can review the scope of the Network Panel Lenders.

The Importance of the Exit Strategy

Every bridging application needed a clear exit strategy.

The exit explained how the short-term loan would be repaid. Common routes included:

• Refinancing onto a buy-to-let mortgage.
• Moving to a commercial mortgage.
• Selling the refurbished property.
• Repaying from another confirmed source.

A proposed refinance was not automatically guaranteed.

The completed property still needed to meet the future lender’s criteria. The borrower also needed to satisfy affordability, rental cover or commercial lending requirements at that stage.

The practical lesson is simple. The beginning of a project and its ending must be considered together.

Shawbrook Bank’s 2021 Refurbishment Proposition

At the time of the original publication, Shawbrook promoted a bridging proposition for property purchase and refurbishment.

The published information referred to features including:

• Monthly rates beginning at 0.50%.
• Funding of up to 85% LTV in certain refurbishment cases.
• Some fees being added above the stated LTV.
• No minimum interest period.
• Consideration of borrowers without prior experience for some light refurbishment projects.
• Possible use of automated valuation models for qualifying purchase applications.

These were historic promotional terms from 2021. Lending criteria, rates, valuation methods and maximum loan-to-value limits may since have changed.

Advisers should always check the lender’s current criteria before discussing a product with a client.

What Evidence Could Be Required?

A refurbishment bridging application could require:

• Proof of identity and address.
• Evidence of deposit or personal funds.
• A schedule of works.
• Contractor quotations.
• Planning documents.
• Building regulation information.
• Property valuation.
• Asset and liability details.
• Evidence of previous projects.
• A proposed sale or refinance strategy.
• Supporting evidence for the intended exit.

The lender could also request additional information where the project involved structural changes, unusual construction or commercial use.

What Were the Main Risks?

Bridging finance could provide speed and flexibility. However, short-term finance also carried significant costs and risks.

These could include:

• Higher rates than long-term mortgages.
• Arrangement, valuation and legal fees.
• Retained or rolled-up interest.
• Delays to building work.
• Cost overruns.
• A lower-than-expected completed value.
• Difficulty securing the intended refinance.
• Default charges if the loan exceeded its term.

A borrower therefore needed sufficient contingency funds. They also needed time within the loan term to address delays.

Consumers looking for advice can search for bridging loan mortgage brokers through Connect Experts. Connect Experts is an adviser directory and does not provide mortgage advice directly.

Why Adviser and Network Support Mattered

Specialist property cases often depended on how clearly they were presented.

An adviser needed to understand:

• The lender’s refurbishment categories.
• Maximum lending limits.
• How refurbishment funds were released.
• Valuation requirements.
• Acceptable property types.
• Borrower experience requirements.
• The evidence supporting the exit.
• Whether the future mortgage route was realistic.

Training can help advisers identify weaknesses before a case reaches a lender. Connect provides training and development for mortgage advisers across mainstream and more complex lending areas.

Where a project involved business premises or commercial investment property, the borrower could also search for commercial mortgage brokers.

Refurbishment Finance in Perspective

Refurbishment finance was not simply a faster version of a mortgage.

It connected three separate stages:

1. Acquiring the property.
2. Completing the planned work.
3. Repaying the short-term loan.

A strong case considered all three before funds were committed.

For mortgage advisers, lender access was only one part of that process. Case placement, compliance guidance, training and a clear understanding of the exit were equally important.

Advisers interested in broader support across bridging, buy-to-let, commercial and mainstream mortgages can explore how to join Connect Network.

 

Frequently Asked Questions

Is refurbishment bridging finance a long-term mortgage?

No. It is normally short-term property finance. The loan usually needs to be repaid through a sale, refinance or another agreed source.

Can refurbishment costs be included in a bridging loan?

Some lenders may provide funds towards eligible refurbishment costs. The amount and release method depend on the lender, project and property value.

Why is the exit strategy important?

The exit strategy explains how the loan will be repaid. A weak or unsupported exit can make the application unsuitable for a lender.

Can a first-time property investor obtain refurbishment finance?

Some lenders may consider applicants without previous refurbishment experience for lighter projects. More complex work may require evidence of relevant experience.

Are the Shawbrook terms quoted in this article still available?

The figures relate to information published in 2021. Current rates and criteria must be checked directly through current lender systems before any recommendation is made.

This publication is intended for use by intermediaries. Product availability and lender criteria can change. Some forms of buy-to-let, commercial and bridging finance are not regulated by the Financial Conduct Authority.