It feels like forever since I’ve posted but here we are! With property prices starting to become more realistic, and interest rates on term mortgages falling, we are seeing plenty of purchases using bridging. So what are your options?

BORROWING FOR REFURB COSTS

This seems the obvious answer, why wouldn’t it be if the lender can fund the purchase and refurb? Well, it may not be for a couple of reasons…

The lender will always work back from your GDV and will lend 65-70% of this figure in total. So you need a profitable deal in its own right to achieve 70% on day one as well as funding all the refurb. This means that if planning is required (which you don’t yet have), or it’s an HMO conversion you could struggle.

Also, the costs are funded in arrears, so you need a working capital of around £25k (minimum) to start the works.

With valuers being cautious over a potential downturn in the market, the GDV you may achieve now before work has started may not reflect the value you would get at the end either. So bear that in mind when looking at your figures.

SO THE ALTERNATIVE – A HIGHER DAY-ONE LOAN

We’ve now got a number of options to maximize your day-one loan, rather than rely on funding for the works. The advantage of this type of loan is that you are less concerned with the GDV (although lenders do look at it), so you are more likely to achieve what you set out to.

We can lend up to 85% net day one for light refurbishments, and 80% for heavy refurbishments.

You would then need to fund the works, but with an additional 10-20% more than you would expect for a refurb loan (and bearing in mind the initial outlay to start the works), this may not be that much less in total.

The options available and most relevant will depend on your total costs, profit, and split between purchase and refurb costs so I’m happy to have a chat about how it would work for your deal!