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Get a Bridging Loan to Buy and Renovate a Property to Sell
Thinking of buying a property to renovate and sell? House flipping can be lucrative, but funding these projects can be an issue. Bridging loans can offer a fast and flexible solution.
If you’ve found a property that offers scope for you to refurbish and sell at a profit but don't have your own funds to cover the purchase price or renovations, you could be looking for a short-term loan to make it possible.
The cost and flexibility of this loan could make all the difference to the success of your project.
Experienced property developers make use of a variety of different types of property finance to achieve their goals, and are aware that their needs may not be best served by traditional high-street banks.
Related: Short Term Loans for Flipping Houses
Related: Financing Your Next Property Renovation - Refurbishment Bridging Loans
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Finance from Traditional Lenders
Funding for a Light Refurbishment
Funding for a Heavy Refurbishment
Can Traditional Lenders Help You Buy Property to Renovate?
Despite their visibility and accessibility, conventional lenders like the high street banks and building societies generally don’t offer the fastest and most flexible finance for renovation projects.
Being aware of the potential stumbling blocks in the application process can save you valuable weeks and months waiting for a decision on a loan for which your project is never going to be considered suitable:
Rigid financial products
Typically, traditional lenders offer a limited number of financial products that are geared towards only a handful of circumstances.
Most of their loan types, such as residential mortgages, are well-suited to long-term property ownership. Costed over terms of 20 years or more, this type of mortgage finance isn’t suitable for short-term property ownership and funding of projects that require substantial improvement works.
You’ll find that your type of property doesn’t qualify for their criteria, and you would be faced with hefty early repayment charges of 3% or more if you want to repay the finance within a minimum of two years.
Limitations on property types
The greatest profit margins on property renovation projects can be found by buying very rundown properties that don’t attract buyer interest from owner-occupiers.
Often sold at auction, many of these properties will be considered "unmortgageable" by high-street lenders because they fail to meet the criteria of a property that they would be able to sell quickly in order to redeem their loan amount, should the situation arise.
The common high-street definition of an unmortgageable property:
- It doesn’t have a functioning bathroom or kitchen
- There are "structural issues" which need to be addressed
- It’s very low-value: under £50,000
- It would be defined as "derelict"
If you’re considering buying a property that matches any of these criteria, it’s unlikely a traditional lender will be willing to provide the finance you need.
In-depth portfolio review
High-street lenders commonly set a cap on the number of properties you can own when applying for a loan to limit their exposure.
And they will usually complete an in-depth review of an applicant's property portfolio. These lenders want to establish that you have a track record of successful developments. They also want to assess your financial position in order to make a judgement on whether you can afford the loan repayments.
If you are not only refurbishing properties to sell on but are holding properties that you let out, and if you have four or more mortgaged rental properties, you will be deemed a "portfolio landlord."
Since 2017, the Prudential Regulation Authority (PRA) has required portfolio landlords to meet more stringent lending requirements: each property in a portfolio must be able to show a profit – the returns on the others cannot compensate for the losses on one property.
If you don’t have the development experience a high street lender is looking for, and your portfolio doesn’t show the income stream they require, your application will probably be turned down.
Lengthy application process
You will not be alone in having spotted a redevelopment opportunity: experienced property developers are constantly looking for new sites.
You won’t want to lose potential profit margin by getting caught up in a bidding war, so your only advantage in securing an identified opportunity is acting quickly.
One of the major problems that borrowers report with high street banks is how long they take to process applications. Two to three months is not an uncommon time period for finance approval at the busiest buying times of the year, and it will probably mean that you lose out to another buyer.
In addition, many of the deceased estate or repossessed properties that come to market are sold at auction, for which traditional mortgage finance can’t move fast enough.
The deposit on an auctioned property (usually 10%) must be paid for when the hammer comes down, with the remainder due in (usually) 28 days. This is not a timetable that conventional mortgage finance can adapt to, so you will need short-term bridging finance.
Bridging Loan Calculator
Get an instant indication of the cost of your finance with Clifton Private Finance’s online Bridging Loan Calculator below.
Alternative Routes to Finance
Due to the limitations of traditional lending practices, increasing numbers of developers are turning to specialist lenders to access the type of finance they need.
Finance available: refurbishment bridging loans
A refurbishment bridging loan is designed specifically for short-term use to “bridge” the gap between purchase and repayment – by sale or mortgage on a residential or buy-to-let mortgage.
They can be structured to provide funding for both the purchase and the refurbishment works and have features that are particularly attractive for developers:
Significant funding
Refurbishment bridging finance can provide developers with another way to get substantial funds for their developments.
Some lenders that Clifton Private Finance works with are able to offer refurbishment bridging finance from £50,000 to £25 million.
Naturally, the amount of funding you can access will depend on your project and your financial position.
Flexible interest payments
Typically, refurbishment bridging loans come with the option to “roll-up” the interest to be paid at the end of the term of finance. Deferring the interest payment can allow you to focus your entire loan amount on your purchase and refurbishment costs instead of servicing monthly interest payments. (The total cost of the borrowing will be higher, but your sale price or remortgaging will pay this.)
Bespoke terms
Refurbishment loan lenders can offer finance terms from one month to two years. You will usually arrange for borrowing to extend for the maximum time available to allow for delays and contingencies but with the option to repay early without early repayment charges.
On bridge finance interest is quoted monthly (rather than annually, as for mortgages), and charged daily. You pay for literally the number of days you have had the finance rather than to the end of a month.
Agreed exit plan
A clearly defined exit plan is required of any bridging finance to reassure both lender and borrower that the strategy for repaying the loan (such as re-sale within a year) is realistic. Most bridging lenders will contact their borrowers three months before the agreed exit date to confirm that the exit can be achieved on schedule.
For example, if an extension is required to allow a sale to be completed, that may be agreed upon. Alternatively, a lender may propose an alternative exit plan – a reduced sale price or refinance as a buy-to-let – to reflect changed market conditions.
Related: Home Improvement Loans - The 7 Best Options
Here are some of the rates we've secured for clients recently:
Rates from: Downsizing/Upsizing Releasing Funds From Your Home Short-Term Lease Finance Auction Purchase As at 17th January 2025 Rates from: Light & Heavy Refurb Finance For Unmortgageable Properties Land Purchase with planning As at 17th January 2025 Rates from: Up to 80% LTV Minimum Loan £500k Minimum net income £100k As at 17th January 2025 Thank You for your interest - please complete the form below and a member of our team will be in contact.Residential
Buying Before Selling?
0.55% pm
Development & Refurb
Fast Finance
0.55% pm
Residential
Large Bridging Loans
0.55% pm
Contact Us
Is Your Project a Light or Heavy Refurbishment?
When you approach a specialist lender for a refurbishment bridging loan, you will need to be clear whether you need a light refurbishment loan or a heavy refurbishment loan.
The costs and arrangement procedures for a light refurbishment loan will be very similar to those of standard bridging finance for a residential property.
The greater risks to lenders of a heavy refurbishment project, where the property may lose immediate value while works are in progress, mean that you will have to take into account a higher interest rate on your borrowing and increased set-up costs (for example, a more detailed survey and valuation).
Funding for a Light Refurbishment
Your project is a light refurbishment if it meets the following criteria:
The works aren’t covered by building regulations
Minor refurbishment works on a property, such as replacing windows, baths or toilets and installing new power points and lights, don’t need to comply with building regulations.
To check whether building regulations apply to the works you plan to undertake, refer to the government website and the Planning Portal.
You don’t need planning permission
Again, if you don’t need planning permission, these are probably light refurbishment works.
For example, if you want to turn an adjoining garage into an additional room, and the works are internal and don’t enlarge the total area of the building, you don’t need planning permission.
Check whether planning permission is needed on the government website and the Planning Portal, and speak to your local council planning department.
The purpose of the premises stays the same
If you are upgrading a single residential unit, you don’t need planning permission.
If the garage conversion you are planning will create a separate dwelling, you will need planning permission.
If you’re subdividing a house into flats or converting a large residential property into a guesthouse, nursing home, or student accommodation, you will need planning permission, and your project will be defined as a heavy refurbishment.
Again, check on the government website and the Planning Portal.
Funding for a Heavy Refurbishment
If your project doesn’t meet the criteria of a light refurbishment you will probably be needing a heavy refurbishment bridging loan.
The cost of the development
If the overall cost of the projected development is more than 15% of the property's value, you will probably require heavy refurbishment finance.
The project requires structural changes
If you’re undertaking a major project, such as converting a large residential property into student housing, and structural changes to the property will be necessary, planning permission is usually required, and the relevant building regulations will apply.
Contact Clifton Private Finance for the Refurbishment Finance You Need
If you’ve found a property you know you can buy, do up and sell at a good profit, we can get you the finance you need. We have an award-winning bridging team who can guide you through your options.
As a whole of market broker, we have relationships with specialist lenders, private banks, family offices and wealth managers who are willing to fund both light and heavy refurbishment projects.
We can find the best deal for your circumstances and are committed to getting results. To see what we can do for you, call us at 0117 959 5094 or book a consultation below.
FAQs
Understanding the difference between net and gross calculations is essential when comparing deals from bridging loan lenders. The calculation determines the maximum LTV (Loan-to-Value), how much you can borrow, and how much you will eventually repay. Here’s the difference: When calculating the net loan amount for bridging loans, the borrower deducts the loan costs and additional fees (such as the arrangement fee) from the total loan amount - this is known as net loan calculation. Contrary to that, gross loan calculation is based on the loan amount the borrower can receive without deducting any costs or fees. In brief, the gross loan calculation represents the total amount available to the borrower, while the net loan represents what the borrower ultimately receives after deductions. A common complication arises when it comes to comparing bridging lenders, as different lenders advertise their bridging loan products differently. The upshot of this, is that it can become difficult to determine if a higher LTV (loan-to-value) represents the actual amount you could receive. Lenders typically use a gross loan calculation when advertising or promoting their bridging loan products. This is because the gross loan amount represents the maximum loan amount the borrower is eligible to receive, and can be used as a marketing tool to attract potential borrowers. Nevertheless, the net loan calculation is used when negotiating an agreement, which is the amount the borrower will receive after deducting fees and other costs. Borrowers are responsible for repaying this amount, and lenders will use that amount to determine repayment schedules and other loan terms. How a broker can help with bridging loan calculations A broker can assist with bridging loan calculations by providing clarity, expertise, negotiation skills, and a comparison of loan options to help you make more informed decisions. A first charge bridging loan refers to a bridging loan that is the only charge against the property, i.e., there is no existing mortgage on that property. A second charge bridging loan is when there is already a mortgage on the property that the bridging loan is being secured against. In the event of repossession, the 'first charge' has the legal right to be repaid first, before the second charge, which is why second charge loans can be slightly more expensive as they're a greater risk to lenders. It is still entirely possible to secure a second-charge bridging loan and they are common within the industry. Yes, you can get a bridging loan with bad credit. While lenders will look at your credit score and factor it into your application, there is no requirement for regular loan servicing with a bridging loan, and so your income is not analysed and your credit score is significantly less important than with a mortgage. Almost all regulated bridging loans are short-term, and have a duration of 12 months. Bridging loans are short-term by nature. However, there can be some flexibility on term length, particularly for unregulated bridging. For example, bridging for development projects, flipping properties, buy to let bridging loans and commercial bridging loans can all have longer terms up to 36 months. Some bridging loan lenders allow you to extend your term if at the end of 12 months your property hasn't sold or your alternative funding hasn't come through yet - however, this is down to the lender's discretion and there are no guarantees. It's important to be aware of the risks of bridging loans, and your property can be seized and sold to compensate for failure to repay. A bridging loan exit strategy is simply the way in which you plan to repay your bridging loan. The most common exit strategies are selling an existing property, selling the property you're purchasing, refinancing with a mortgage, or a combination. Other more unique exit strategies can include selling a business, receiving a pending inheritance, or receiving a large tax rebate. Here are some of the most common alternatives to bridging loans: We break down each of these other financing tools in our full guide to alternatives to bridging loans. While none of these options provide the flexibility, loan size and low interest rates that bridging loans do for property transactions, you may find they are more appropriate finance options for your specific situation. No, there is no strict age limit for securing a bridging loan. Bridging loans are typically 12 months in duration, which means that there aren't age limits in place like there are for mortgages that can last for 25+ years. The main example where age may be an issue is if you plan to refinance your bridging loan with a standard mortgage. In which case, you'll need to be eligible for a standard mortgage to qualify for your bridging loan - and if you are approaching retirement age, this could be an issue and you may be rejected for a bridging loan. However, we work with specialist equity release and lifetime mortgage lenders that can provide a Decision in Principle for later-life lending (if it's feasible) so that your bridging loan can be approved if it makes sense with your broader strategy. There are two types of bridging finance: regulated bridging loans and unregulated bridging loans. It simply depends on the intended use of the property you're purchasing. When you or a family member intend to live in the property you’re purchasing with your bridging loan, you’ll need a regulated bridging loan. If you're getting bridging finance on property that you or a family member will not be living in, or if it’s a commercial property, then you’ll need an unregulated bridging loan (commercial bridge loan). And if you intend to sell the property to repay your bridging loan (flipping the property) instead of refinancing or selling another property, you’ll get an unregulated bridge loan. Regulated bridging loans are authorised and regulated by the FCA and are usually locked to a 12-month maximum term. Unregulated bridging loans, meanwhile, can have extended periods of up to 36 months and are generally more flexible. If you’re unsure, it’s best to speak to a qualified adviser to go over exactly what you need and find the best bridging loan for you. Yes, your bridging loan lender will require a new valuation to be carried out for all properties in your bridging loan transaction. In some cases, we can work with lenders that can facilitate a 'desk valuation', which is a valuation carried out online based on the local property market, images of the property and the specifications of the home - this can save a considerable amount in fees and speed up your application, but it's not always possible, especially for higher value properties. You can borrow up to £25m with bridging finance, but it’s typically capped at about 80% of the value of the property you’re using as security. It's important to note that different lenders have varying policies and criteria regarding the maximum loan amounts they offer for bridging finance. Some lenders have a maximum limit of over £1 million, while others may specialize in smaller loan amounts. Additionally, the terms and conditions of the loan, including interest rates and fees, should also be taken into consideration when determining the overall affordability of the bridging loan. You don't necessarily need a deposit for a bridging loan in the traditional sense of cash reserves, but you do need security for your loan in the form of another property or asset to keep the loan-to-value below 80% at a maximum. For example, if you're buying a £300k property with a £300k bridging loan, you'd need another property to secure the loan against along with the property you're buying, or else your loan to value would be 100%. You can effectively secure a loan for 100% of a property value, but only if you have other property as security to keep your overall loan-to-value below 80%. So, if you're getting a loan for 100% of a property value, you'll need another property in the background to secure it against. The easiest way to see if you're eligible is either to give us a call or use our bridging loan calculator that automatically calculates your LTV. Using funds from a bridging loan to purchase a property puts you in a strong position as a buyer - similar to that of a cash buyer. Being a cash buyer is attractive to sellers because there is no onward chain requirement, and the funds are ready to go for the purchase. Using a bridging loan also eliminates the need for the chain to complete, and puts you in a position where funds can be available in a matter of weeks for completion; effectively rendering you a cash buyer to prospective sellers. Regulated bridging loans (for residential properties) are typically 12 months, however, some non-regulated bridging loans for buy to lets and commercial properties can be up to 36 months. Some lenders are more flexible on term durations than others, and it can be a case-by-case basis as to whether you'll get approval for a longer loan term. Yes, you can use a bridging loan to pay Stamp Duty. This amount could be covered by a bridging loan, providing you have a way to repay the additional borrowing amount to your lender. Yes, bridging loans are generally considered safe provided they are used for suitable property transactions. Speaking to a bridging loan adviser is recommended if you're unsure about the risks and suitability of a bridging loan for your situation. Generally speaking, the main risk of a bridging loan is that if you cannot repay the loan, your property can be repossessed and sold to clear your debt. For example, if you take out a bridging loan to buy a new property but your existing property fails to sell and you cannot recoup the funds, this could become a risk. However, bridging lenders always require their own valuations for any property involved in a bridging transaction to combat this. Another example could be that you're unable to secure a mortgage to refinance your bridging loan. At Clifton, we make sure your remortgage plans are sound if this is your bridging loan exit strategy, and can even arrange your mortgage for you through our dedicated mortgage advice service on the other side to smooth the process. Bridging loans are designed to be short-term so there’s no maximum age limit when applying for a bridging loan. This does depend on the lender, as some bridging lenders do have an upper age limit, but there are lenders on the market who offer bridging loans for borrowers aged 70 and over. Bridging loan interest rates usually range between 0.45% - 2% per month, depending on the case and the market rate. Unlike mortgage interest rates, bridging loan interest is calculated monthly instead of yearly. This is because bridging loans are short-term and, in many cases, repaid within a year. Bridging loans can be arranged without early repayment penalties, so interest is calculated monthly to ensure you only pay interest on the months you have the loan for. No high street banks currently offer bridging loans. Instead, bridging loans are provided by specialist short-term finance lenders. At Clifton Private Finance, we are a whole of market brokerage that deals with multiple bridging loan lenders, and we act as an intermediary between clients and the lender ensuring the process is smooth and hassle-free, and making sure our clients are getting a good deal. Banks typically charge two main fees when taking out a bridging loan – arrangement fees and interest. But there are other costs to consider such as valuation fees, broker fees and administration fees. Costs can vary from lender to lender, and will also depend on what your bridging loan is for (e.g., residential or commercial purposes.) Arrangement fees are what the lender charges you to take out the loan and can range between 1.5 - 3% of your overall loan. Bridging loan interest, on the other hand, is calculated monthly. This can catch borrowers out who may be expecting an Annual Percentage Rate (APR) like with a mortgage. You cannot turn a bridging loan into a mortgage, but you can repay a bridging loan with a mortgage and effectively refinance it into a long-term arrangement. This is common when buying an unmortgageable property with a bridging loan, carrying out refurbishments, and then mortgaging it once it is wind and water-tight and a new valuation has been carried out. This is also common for properties bought at auction where a mortgage would be too slow to arrange, and so a bridging loan is used which is then replaced with a mortgage later. Yes, bridging loans are typically more expensive than mortgages. Bridging loan interest rates can be much higher than a mortgage, and are calculated and displayed as monthly rates instead of the usual annual percentage rate (APR) that you’ll see on a mortgage. However, bridging loans are a short-term solution, and you’ll only pay interest on the months you’ve borrowed money for – and you can repay early without any charges (for most loans). There are many circumstances where bridging loans are an affordable option and a means to an end - for borrowers that need to finance a property purchase quickly, it may be the only option available. If there is a purchase involved, bridging loans are paid from the lender to the lender’s solicitor, then to the client’s solicitor, and then to the seller’s solicitor - so, you as a client will not see the funds in your own account - similar to a mortgage. If there is no purchase involved (for example, for a bridging loan for home improvements before selling), the funds go from the lender to the lender's solicitor, to the client’s solicitor, and then to the client's bank account. In terms of how bridging loans are repaid by you, they are repaid as a lump sum, either at the end of your term or during it. You can choose to either 'service' the interest, so pay the interest back monthly, or roll it up into the value of the loan to also pay this off as a lump sum along with the capital. In most cases, a bridging loan will require a minimum deposit of 25%. However, the minimum can vary depending on the lender and the specific circumstances of the loan itself. Generally, bridging loans are secured against a property or other valuable assets, and the deposit required is often expressed as a percentage of the property's value, known as the loan-to-value ratio. In some cases, 0% deposit bridging loans are an option, but only if you have other property or assets in the background to provide additional security. You do not pay monthly instalments towards the capital loan of your bridging loan. Some bridging loans require you to repay the interest accrued each month, but most lenders will actually give you the option to roll this up into the loan value, meaning you repay it with your lump sum at the end and have absolutely no monthly commitments. It's worth noting that as soon as you pay off most bridging loans, you stop accruing interest - so, the quicker you pay it off, the less expensive it will be, and there are typically no ERCs (early repayment charges). Bridging loans can be arranged in as little as 7 working days. However, it depends on the complexity of the bridge loan and your specific circumstances. It may also be more expensive for you to rush an urgent application through – but not impossible. Bridging loans are a popular option for borrowers who are under time constraints, such as buying a property at auction or breaking a chain. The key factors lenders tend to consider are: Security - Bridging finance is usually secured against property or other valuable assets. Lenders will assess the value and marketability of your security. Exit Strategy - Lenders will want to understand how you plan to repay your bridging loan. In most cases, this is selling your old property, selling the new property (flipping), or refinancing with a long-term mortgage. Loan-to-Value (LTV) Ratio - Lenders consider the loan amount compared to the value of the property being used as security as a percentage. The LTV ratio can vary, but most lenders will have a maximum of 60-80% LTV. Remember, the criteria for obtaining bridging finance in the UK can vary depending on the lender and your circumstances.
What are net vs gross bridging loan calculations?
Which calculation do lenders use for bridging loans?
What is the difference between first-charge and second-charge bridging loans?
Can you get a bridging loan with bad credit?
How short-term are bridging loans?
What are bridging loan exit strategies?
What are some alternatives to bridging loans?
Is there an age limit on bridging loans?
Are bridging loans regulated?
Do you need a valuation for a bridging loan?
How much can you borrow with bridging finance?
Do you need a deposit for a bridging loan?
Can I get 100% bridging finance?
Does a bridging loan make you a cash buyer?
What is the longest bridging loan term?
Can I use a bridging loan to pay stamp duty?
Are bridging loans safe?
Can an 80 year old get a bridging loan?
What is the monthly interest rate on a bridging loan?
Do banks still do bridging loans?
How much do banks charge for bridging loans?
Can you turn a bridging loan into a mortgage?
Is a bridging loan more expensive than a mortgage?
How are bridging loans paid?
What is the minimum deposit for a bridging loan?
Do you pay monthly payments on a bridging loan?
How long does it take for a bridging loan to come through?
What is the criteria for bridging finance?
