Refurbishment Loans

What is a refurbishment loan?

A refurbishment loan is used to make improvements to a property you intend to rent out or sell rather than live in. These renovations can be anything from cosmetic changes up to major structural alterations that typically require planning permission. This type of loan is suitable for developers, landlords and property investors.

Refurbishment loans are suitable for house flipping. This is when you purchase and renovate a property in order to sell for a profit. The profit will more than cover the amount of the loan, but you need the funds to be able to do the work before you can benefit from it. It’s important to understand the risks if the property doesn’t increase in value, including if you fail to repay the loan.

How does a refurbishment loan work?

A refurbishment loan is a type of bridging loan - a short-term solution for borrowing potentially large sums of money. Given the short-term nature of the loan, it’s understood that you will repay it with the proceeds of the sale of the property.

You are likely to receive the funds from a refurbishment loan in two instalments. The first will be before the work starts and is based on a percentage of the purchase price. The second is after the work has been completed and following an inspection to assess its value.

Types of refurbishment loan

There are two types of refurbishment loans. The loan you’ll want depends on the size of your project.

Light refurbishment loan

A light refurbishment loan is for cosmetic changes to your property. This might include simply redecorating or furnishing. Perhaps you intend to fit a new kitchen or bathroom. These are projects that don’t change the structure of the property, so won’t require planning permission or building regulations to be approved. The refurbishments also won’t change how the property is used.

Heavy refurbishment loan

A heavy refurbishment loan is required for larger jobs that aren’t just cosmetic. When you need building regulations approved, or planning permission given, to make structural alterations to the property. This could include, for example, converting a building into self-contained flats or making a significant change like an extension. These longer-term projects can take time to complete, so you may need to borrow upfront to cover costs.

Commonly asked questions about refurbishment loans

If you have more questions about applying for a refurbishment loan, check out our commonly asked questions here.

How does a bridging loan work?

A bridging loan is designed to bridge the gap from purchase of a new property to the sale of an old one. If you’re struggling to sell a property, a bridging loan makes a sensible short-term solution to ensure you can make repayments on the old mortgage.

Because it’s designed as a short-term loan, you may find that the interest rates that lenders offer can add up over time.

Is a refurbishment loan a good idea?

A refurbishment loan could be a short-term solution to securing the funds you need to complete your project. It’s best suited to those who are confident they’ll be able to pay the loan back on completion, but don’t have the money to get started.

However, if you are solely relying on the sale of the property to make the repayments, you need to be sure that it will sell. If you complete the refurbishments and then struggle to sell the property, you will still need to make repayments while the house is still on the market.

It’s best to have a back-up plan, so you aren’t just relying on the profits to pay back your loan. Otherwise, you could risk losing the property altogether.

Refurbishment loan details

At Norton Finance, we have access to over 600 lending plans. Find out how our refurbishment loans work below.

What are the interest rates?

The interest rates we offer will vary based on your current circumstances and financial history. As a broker, we will always shop around for the lowest available rate.

How long will a decision take?

You should allow 1-2 weeks for your application to be processed and the money to arrive; however, you can get an instant decision in principle when you apply online.

Are there any loan fees?

Because we’re a broker, and not a bank, we treat loan fees differently. The lender pays us commission upon the award of a loan. We may also charge a broker’s fee for up to 12.5% of the loan amount, which is capped at £3,995. On remortgages, the fee is up to 7.5% of the borrowed amount, capped at £2,000. We do not charge these fees on unsecured loans.

Applying for a refurbishment loan

At Norton Finance we know your needs might differ depending on the type of project you’re taking on. When you apply for a home refurbishment loan, we will search the market to ensure we find one that suits your specific requirements and work to get you the best deal.

Use our loan calculator to explore your options when it comes to monthly repayments and flexible terms. Simply enter how much you'd like to borrow and for how long, to see your options.