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How Bridging Loans Can Assist in Property Renovation

Renovation and refurbishment can add value to your property; bridging loans can help renovate a property. You can purchase discounted property in a dilapidated/uninhabitable state, renovate it using funds, and re-mortgage that property at a higher market value.

Refurbishment/renovation projects can be heavy on your pocket unless you get money from some other resources. These projects can be accomplished in a joint venture in which one partner invests money and the other expertise. There is another possibility to accomplish these projects soon; that is bridging finance.

What is Bridging Finance?

Bridging finance provides a funding solution for the short-term; it is an ideal option for those who need quick access to funds temporarily.

Bridging Finance for Property Renovation

Bridging loans can greatly help property renovation and development projects for traders, property developers, and investors. You may be short of funds when you purchase a property and then plan to renovate it to gain profit. In this situation, your project can remain incomplete if you lack funds. In this crucial time when you need money the most to accomplish your project, bridging loans provide financial help, and the funds are granted in stages to complete the renovation. By doing this, you can complete development, and the loan is repaid when you sell that renovated property at a higher market value.

These loans can be secured from specialised bridging lenders with the help of bridging brokers. The loan application will have a brighter chance of approval if you have prior experience in development projects. The lenders are interested in whether you can repay the loan or not. Refurbishment loans can be of two types:

Light Renovation/refurbishment bridging finance

These loans are usually for aesthetic improvements such as constructing a new kitchen, painting, or installing a central heating system. They cost under 15% of the property’s value. No planning permissions and building regulations are required for light renovation loans.

Heavy Renovation/refurbishment bridging finance

These loans focus on structural work, extensions, or loft conversions. These loans cost 15% of the property’s value. Planning permissions and granted and building regulations are followed.

Refurbishment Bridging Loan Criteria

The criteria for renovation/refurbishment bridging finance are as under:

  • Some bridging finance providers grant refurbishment bridging finance from £50,000 to £25 million. The loan amount depends on your circumstances and financial position.
  • Maximum Loan to Value LTV is 75% (100% with additional security deposit)
  • Loan terms can range from 3 to 36 months.
  • The exit route is usually a sale or refinance

Property renovation bridging loan UK can be taken for the following purposes:

Renovating Dilapidated/Uninhabitable Property

Typically, traditional loans are not granted for renovating uninhabitable/dilapidated projects because they are considered high risk.

Dilapidated properties are valued under £50,000 and lack basic amenities such as a bathroom, kitchen, and running water facilities. Bridging loans provide funding to turn it into a habitable condition.

Renovation of a Barn

Bridging loans can help convert a barn into a house, apartment, inn, café, or resort. Barns are located away from the cities in deserted places. A barn renovation can make it into a place to earn a profit, as people would like to spend some time away from the hustle and bustle of city life.

House Renovation

Bridging loans are a valuable tool for renovating a house.

Development finance for land without permission

You can get funding for the development of land without planning permissions. Bridging can help you purchase land, as no other funding will be available for land development without planning permission. With bridging finance, you can make the purchase and get planning permissions afterward. After getting planning permissions and development

Why Bridging Finance for Property Renovation?

Bridging finance can be an ideal option for property renovation or development due to following reasons:

Bridging Finance is quick

Property development and renovation require quick funding within a limited time frame; therefore, bridging finance is a good option for investors and developers to make quick property purchases and renovations.

Bridging Finance is a short-term solution

Bridging loans are short-term loans. Traditional loans are not appropriate for property renovation as they are long-term and usually hard to get for this purpose.

Bridging Finance is flexible

Bridging finance offers flexible terms and repayment strategies. Unlike traditional loans, they do not require additional information like income evidence, credit score, etc. Even bad credit borrowers may also avail of bridging loans conditionally.

They can be secured for any type of property, whether commercial or residential, in any condition.

Unlike traditional loans, there are no early repayment penalties on refurbishment bridging loans if you manage to repay before the deadline.

Renovation/refurbishment bridging finance offers flexible interest payments, typically with the roll-up interest option. The loan amount can be repaid in a lump sum at the end of the term. With this option, you can escape monthly payments, and you could have more capital available for your development.

In Short

Bridging loans/p2p lending can be a great option for property renovations. But you should have prior experience in this sort of renovation project; if you do not have prior experience, you should hire the best builder for renovation so that the funds are not wasted. Also, there should be a good contingency plan to avoid unexpected development costs.

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