Many investors are making good profits through refurbishing property and they use bridging loans to raise the necessary finance.
Refurbishment work can be as simple as a new kitchen or it can be a complete property makeover. Many projects are for change of use. Planning regulations have been relaxed, making it easier to convert office and other commercial buildings to residential accommodation.
Landlords often convert large buildings to houses of multiple occupancy.
Bridging loans are flexible short-term loans that many find ideal for property refurbishment projects. Many lenders regard bridging loans for refurbishments as low risk, as the capital value of the property will be increased after work has been completed. As long as a developer knows what they are doing and also puts some of their own money into the work, a bridging loan application should be favourably assessed.
For large refurbishment projects, the loan may be offered in stages, with payments made after the completion of each milestone.
Normally, a bridging loan for refurbishment will be offered at a low loan-to-value rate, requiring the borrower to pay a large percentage of the cost of the refurbishment. A broker can negotiate on the borrower’s behalf, often obtaining a higher loan-to-value. After work has been completed, the added value of the property can mean that an initial high loan-to-value will be reduced and more favourable terms will be reached.
Many developers develop a lasting relationship with a broker who arranges several short-term and long-term loans.