Property Improvements: Can You Use a Bridging Loan for Renovation?

Buying a property that needs a little TLC, renovating it and selling it on, can be highly profitable if it’s done right. Many people lack the funds or inclination to repair a rundown property, preferring to buy a “ready to move in” home. So there is certainly money to be made in renovation projects.

However, the most profitable properties are those that need serious work done to turn them into a habitable or even a desirable abode. The cost of major repairs such as rewiring, reroofing and updating heating systems can run into tens or even hundreds of thousands. Even if you’re planning minor renovation work on your own home, the bill can quickly add up.

A bridging loan could be the answer.

What Makes a Bridging Loan Different to a Standard Loan?

A bridging loan offers quick access to funds on a short-term basis. They involve less red tape and higher interest rates than standard loans, such as a mortgage, which take much longer to secure and can be paid over many years at lower rates of interest.

The benefits of quick and easy access to funds make bridging loans an attractive prospect for property owners and developers seeking to complete renovation projects in a fixed time scale. A successful property renovation will sell for significantly more than the purchase price, covering the cost of higher interest rates and leaving a healthy profit.

Why Choose a Bridging Loan for Renovation?

For property owners or developers planning minor works on a rundown but habitable building, high street lenders may be willing to approve a renovation mortgage. This mortgage will generally be 80-95% of the property value. However, the funds can take some time to come through and lenders often withhold a portion of the loan as a “retention”, until essential repairs are complete.

Property developers planning a major renovation of a non-habitable property may struggle to find a traditional lender who will agree to finance a project they deem to be high risk. If you’re lucky enough to convince a high street lender to agree to a loan, the funds will be paid out in stages as work progresses.

Bridging loans tend to be much easier to secure, with less red tape and a higher LTV (Loan-To-Value). This option gives fast access to the full loan amount agreed, which can be repaid over 4-12 months. Having ready access to the full amount of funds required to complete the project allows the owner or developer the flexibility to manage their project as they see fit and to respond quickly to issues as they arise.

How Much Can I Borrow?

One might think that due to the relative ease a bridging loan can be secured, the amounts on offer could be limiting. There is far less red tape involved in applying for this type of loan than a traditional mortgage and the process is much faster. At Apex Bridging there is no credit check required and we consider each application on a case-by-case basis.

Despite this streamlined process, we offer loans ranging from £100k to £2m and typically release funds within seven days of loan approval.

Things to Consider before Taking out a Bridging Loan

Bridging loans are short-term loans, so be sure to have a repayment plan in place. Repayment terms can be amended to suit individual circumstances, but you’ll need to settle the balance in 4 – 12 months. Assess your finances before committing to the loan and make sure this is a realistic time frame for repayment.

Due to their short-term nature and the higher-risk involved for the lender, bridging loans have higher interest rates than high-street loans. Compare the expected profit of the renovation project to the costs involved when deciding if this type of loan is the right choice.

How to Get Started with a Bridging Loan

Applying for a bridging loan with Apex Bridging is quick and easy. Get your renovation project underway fast by contacting our team of professionals today. Apex is one of the UK’s leading bridging finance companies and we have helped hundreds of brokers find appropriate funding for their clients.

Contact us today to discuss your requirements. We can offer up to 80% LTV and interest rates starting from just 0.65% for a 60% LTV loan. What are you waiting for?