How to Get Refurbishment Finance for a Buy to Let Property

20-March-2024 16:33
in Bridging
by Jennifer Stevenson
How to Get Refurbishment Finance for a Buy to Let Property

Buy to let refurbishment finance can empower you to take advantage of investment opportunities by providing funding quickly.

You've spotted a fixer-upper that could generate handsome rental income with some TLC. Projects like this can offer huge ROI, but it can be difficult to get a mortgage for them.

If you're looking for a buy to let property to generate rental income, finding one that needs significant renovation could help you grab a bargain. But if you don't have the cash on hand to pay for renovations, you could end up missing out on your buy to let's full potential. This is where refurbishment finance comes in.

What is Refurbishment Finance for a Buy to Let?

Refurbishment finance is a short-term bridging loan that can fund up to 70% of your property refurbishment costs.

Once your development work is complete, you can refinance with a standard buy to let mortgage, or repay your refurbishment loan by selling other assets or via other cash windfalls.

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What Type of Rental Property Makes the Most Money?

What's the Difference Between Renovation and Refurbishment?

What's the Difference Between "Light" and "Heavy" Refurbishment?

Can I Use a Mortgage to Refurbish a Buy to Let Property?

How Does Bridging Finance Work for Refurbishments?

Refurbishment Finance Rates

Bridging Loan Calculator

Will I Qualify for Refurbishment Finance for My Buy to Let? 


What Type of Rental Property Makes the Most Money?

When done well, the rental properties with some of the biggest potential for ROI are refurbished properties and buildings. If you're already a landlord, renovating your rental property could boost your value and make you more money.

However, landlords face a challenge in finding finance at the right price to make renovations cost-effective. In this blog post, we'll explain your options and offer examples of how the right funding could work for you. 

Related: Landlords Are Improving EPC on Rental Properties - Here's Why

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What's the Difference Between Renovations and Refurbishment?

In terms of property finance, the main distinction between renovation and refurbishment is the difference between works classed as "light refurbishments" and those classed as "heavy refurbishments".

But these two terms are largely interchangeable and can cover anything from decorating and recarpeting to replacing entire kitchens and bathrooms, knocking rooms through, or adding an extension.

Related: 6 Home Improvements That Add the Most Value

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What's the Difference Between "Light" and "Heavy" Refurbishment?

  • A light redevelopment/refurbishment involves non-structural, largely decorative work on a property. It usually doesn’t require planning permission or compliance with building regulations. A commonly used example would be upgrading bathrooms and kitchens and replacing floor coverings.

If you can keep to a tight timescale for the renovations, bridging finance can work well for your light refurbishment work.

  • A heavy refurbishment is any project whose total cost is more than 15% of the property value and involves major structural changes, such as altering internal supporting walls or building an extension.

To cover this more extensive work and allow time for the necessary planning approvals, you will need bridging finance running for longer than the standard maximum of 12 months. Most lenders can offer up to 18 months, and some will lend for up to 36 months.

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Can I Use a Mortgage to Refurbish a Buy to Let Property?

  • If you own a rental property with a buy to let mortgage and want to improve or extend it, you could consider remortgaging (extending your mortgage) to fund the work. However, it is important to note that if your mortgage hasn't reached the end of its agreed term, there will be costs to change your mortgage deal early.
  • Extending your mortgage to fund your renovation may only be possible if you have a small mortgage on the property. However, the amount you can borrow will be based on the house’s current value and monthly rental income, so you may struggle to borrow enough for the work you want to carry out.
  • If you're planning on buying a property that needs renovating before it can be used as a rental, it's unlikely you'll be able to get a buy to let mortgage until the refurbishment work is complete. Instead, you'll need to find specialist funding - often known as a refurb-to-let loan.

While you're here, check out our property insurance services to ensure you're getting the right cover for your buy to let property.

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How Does Bridging Finance Work for Refurbishments? 

Most refurbishment finance, including refurb-to-let finance, is offered in the form of a bridging loan. This type of finance is short-term and allows you to borrow significant amounts of capital secured against a property for various purposes, including home improvements.

Bridging loans can be secured as a first or second charge on a property or more than one property. This can be the property you're buying or one you already own. And in some cases, you can use both. 

With a refurbishment bridging loan, you can normally borrow up to 70% of the project's Gross Development Value (GDV). The GDV is how much it will be worth once all work is completed. Loan terms are normally within 1-18 months, and interest is commonly "rolled up" to be paid at the end of the loan term when the capital is repaid.

Bridging loans can usually be arranged quickly, often in as little as 5-7 working days, making them ideal for moving quickly with a project. Securing bridge finance against more than one property can allow you to borrow more or get a more attractive interest rate.

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Refurbishment Finance Rates


Flipping Property?

Buying, Renovating & Selling (or Letting)

Finance Rates from

0.55% pm

1 - 18 months

Rates up to 80% LTV net

As at 20th June 2023

Ground Up Development

New Builds

Finance Rates from

0.83% pm

Up to 24 months

Rates up to 70% of GDV

As at 20th June 2023

Existing Development?

Refinance & Exit Finance

Finance Rates from

0.55% pm

1 to 18 months

Rates up to 80% LTV net

As at  20th June 2023

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Use Our Bridging Loan Calculator

Our bridging calculator can get an approximate idea of what a bridging loan might cost you. But keep in mind that a finance broker will be able to fine-tune your expected charges to your circumstances:

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Will I Qualify for Refurbishment Finance for My Buy to Let?

  • It depends on whether you already own the property, whether you're looking for finance to purchase and renovate, and how extensive the necessary works are. 
  • This is a fairly complex set of variables, so it can be helpful to work with a specialist finance broker who can help you get the best terms for your circumstances.
  • Our experienced team of brokers has contacts with a range of private lenders, which means we can help you get deals that you wouldn't have access to on your own.
  • We can also arrange buy to let mortgages and other refinancing options for when your refurbishment work is complete.

How We Can Help

High-street banks no longer offer bridging loans in the UK. If you plan on taking out a refurbishment bridging loan, you'll need to source one from a specialist lender. 

Private and specialist lenders typically use finance brokers to find clients, but they are not as easy to find or access as high-street lenders. An experienced bridging loan broker will have in-depth market knowledge and can connect you with the most suitable lender for your circumstances. 

At Clifton Private Finance, we have an award-winning bridging team and can get the best rates on the market. If you have found a property you wish to purchase, develop, or sell, we can get the best finance to meet your needs.

We have relationships with lenders offering both light and heavy refurbishment bridging loans and will be able to secure the best financial solution for you. We can guide you through your options and source finance as quickly as possible.

To see what we can do for you, call us on 0203 900 4322 or book a free consultation below.

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Do you need a valuation for a bridging loan?

Yes, a valuation is typically required for a bridging loan in the UK.  

Since bridging loans are often secured against a property or other valuable assets, lenders will want to assess the market value of the property being used as security. This helps the lender determine how much deposit they want you to provide based on the value and condition of the property. 

How much can you borrow with bridging finance?

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. 

Do you need a deposit for a bridging loan?

Yes, you typically need a 20-40% deposit for a bridging loan. 

It can be possible to get a bridging loan without a deposit (a 100% bridging loan), but you’ll need other assets in the background to secure the loan against, and more stringent criteria and higher costs could apply. 

Can I get 100% bridging finance?

Yes, it is possible to get a 100% bridging loan (also known as a 100% LTV bridging loan), but it is rare. This means that you won’t need to put down a deposit and can borrow the full value of your property.  

However, the criteria for these loans can be hard to meet, and you’ll need to provide additional assets as security for your loan. 

Interest rates and fees can also be higher to compensate. 

Does a bridging loan make you a cash buyer?

While using bridging finance doesn’t technically make you a cash-buyer, it can allow you to act like one.  

Mortgages take months to process, often leading to an ‘onward chain’ where all parties involved need to wait for funds to be transferred 

Bridging finance can usually be accessed a lot quicker than mortgages so you can bypass the onward chain, giving you an advantage over other buyers and being attractive to sellers.

What is the longest bridging loan term?

Bridging loans typically have a term of 12 months, but some lenders are willing to stretch their terms to 18 months, or even 2 –3 years depending on the case. 

Terms longer than 2 years will usually only be considered for specific cases.  

Can I use a bridging loan to pay stamp duty?

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.  

Are bridging loans safe?

Yes, bridging loans are safe when they’re used in the right circumstances with a solid repayment strategy. However, we recommend speaking to a qualified advisor, like our brokers at Clifton Private Finance, before you take out a product. 

The main factors to consider with bridging finance are that the full loan amount will usually need to be repaid within a year, and like a mortgage, it is secured against a property as collateral. 

This means that in the case that you aren’t able to repay your bridging loan, your property would be at risk of repossession.  

But with a watertight exit strategy, bridging finance can be an efficient way to secure property quickly. 

Can an 80 year old get a bridging loan?

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. 

What is the monthly interest rate on a bridging loan?

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.

Do banks still do bridging loans?

Unfortunately, mainstream banks in the UK don’t offer bridging loans.

This means that if you’re looking for a bridging loan, you won’t be able to get one using a lender you’d find on the high street.

There are a variety of specialist lenders that offer bridging loans, but because these lenders are smaller and more niche, you may need a bridging broker to access them.

How much do banks charge for bridging loans?

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.

Can you turn a bridging loan into a mortgage?

Yes, you can convert a bridging loan to a mortgage through refinancing, and it is common among borrowers who use bridging finance to buy residential properties.

However, whether or not you’ll be able to refinance to a mortgage is dependent on your financial circumstances, the lender, and the property you’re planning to buy.

It’s important to be sure that refinancing is a viable repayment option before you take out a bridging loan on a residential property.

Is a bridging loan more expensive than a mortgage?

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.

How are bridging loans paid?

The two most common ways to pay a bridging loan are to sell a property or refinance to a mortgage.

You may also need to ‘service’ the loan through the term, which means paying the interest monthly. However, you can opt to ‘roll up’ your bridging interest to be repaid at the end along with the capital.

There are also other ways to repay a bridging loan, such as selling a business or even using money from an inheritance.

The method in which you pay your bridging loan can be flexible, just as long as it is clear in your application that you have a surefire way to repay your loan when the terms are up.

What is the minimum deposit for a bridging loan?

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.

Do you pay monthly payments on a bridging loan?

No, typically, you’ll repay a bridging loan in one chunk at the end of the loan term. Bridging loans are a form of short-term finance and will usually need to be repaid within 12 months, but there can be room for flexibility.

In some cases, borrowers may be required to make monthly interest payments. This means that each month, you would pay the interest accrued on the loan amount while the principal amount remains outstanding until the end of the loan term.

But usually, the interest is "rolled up" or added to the loan balance and paid with the rest of the loan at the end of the term. This option can help protect your cashflow so you can spend it on moving costs or refurbishments, for example.

How long does it take for a bridging loan to come through?

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.

What is the criteria for bridging finance?

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.