The benefits of staged drawdowns for refurbishment projects

For property investors, there are many contributing factors that determine whether an investment turns a profit, and by how much. Timing, location, market conditions and cost efficiency all play a major role in shaping returns. While many of these variables are outside an investor’s control, how they structure their finance is not – and that can make all the difference.

One often-overlooked aspect of finance strategy is when and how funds are drawn. Too often, investors take out the full amount of a bridging loan upfront, even if the capital isn’t needed until months down the line. This leads to unnecessary interest costs, reduced flexibility, and poor use of capital.

To address this, Castle Trust Bank offers staged drawdown facilities across both its heavy refurbishment and light refurbishment bridging loans. These allow borrowers to access funds in phases, aligned with the project schedule, so they only pay interest on the money they’ve actually used.

It’s a subtle change in funding structure, but one that can dramatically increase cost-efficiency, protect cashflow, and ultimately boost investment returns, particularly in a market where margins are tightening.

What is a drawdown facility?

A drawdown facility allows a borrower to take out their agreed loan in phases, rather than receiving the full amount in a single advance. This is especially useful for refurbishment projects where works are scheduled in stages and capital is only required incrementally.

Castle Trust Bank now offers drawdown options on:

• Heavy refurbishment bridging: up to five drawdowns, minimum £50,000 each, maximum cost of works £1 million.
• Light refurbishment bridging: minimum drawdowns of £25,000, up to £500,000 total works cost.

In both cases, borrowers only pay interest on the money they’ve drawn down, not the full facility. This helps reduce total interest costs, improves affordability, and gives investors better control of their funding.

When are drawdowns most useful?

Drawdowns can be beneficial in a wide range of refurbishment scenarios, including:

• HMO conversions or structural alterations, where funding is needed for distinct project phases like demolition, plumbing, electrics, and interior fit-out.
• Permitted Development (PDR) conversions, where initial works may be limited while awaiting planning confirmation or change of use.
• Buy-refurb-refinance projects, where light refurb works such as kitchen/bathroom replacements or cosmetic upgrades are carried out over 3–6 months.
• Multi-project portfolios, where investors are juggling several sites and want to preserve capital until it’s needed.
• Energy efficiency upgrades, including insulation, double glazing, and heat pump installations scheduled over time.
• Leasehold improvements, where works carried out on leasehold properties, meet the landlord's obligations or improve value is structured to meet phased service charge milestones or major works timelines.
• Student or co-living conversions, often involving phased refurb across terms or calendar gaps in occupancy.

By drawing funds only when necessary, investors can improve cashflow and potentially reinvest the savings elsewhere in their portfolio.

Worked example 1: Investor A vs Investor B

Two investors each take on identical properties needing £500,000 of refurbishment. Interest rate is 0.75% per month. Project duration: 6 months.

• Investor A takes out the full £500,000 on day one.
• Investor B draws £300,000 upfront and the remaining £200,000 at month 3.

Interest costs:

• Investor A pays interest on £500,000 for 6 months = £22,500.
• Investor B pays:
 o £300,000 for 3 months = £6,750
 o £500,000 for months 4–6 = £11,250
 o Total: £19,125

Saving: £3,375

What could this saving pay for?

• A skilled tradesperson for a week or more (carpenter, electrician).
• New appliances or a bathroom suite.
• Staging, furnishings, or professional photography for letting.
• A contingency buffer to reduce risk.

Worked example 2: Investor C vs Investor D

Now let’s consider a lighter refurb project with a £300,000 facility over 6 months.

• Investor C draws £300,000 day one.
• Investor D draws:
 o £100,000 month 1
 o £100,000 month 3
 o £100,000 month 5

Interest costs:

• Investor C: £300,000 x 0.75% x 6 = £13,500
• Investor D:
 o £100,000 for 2 months = £1,500
 o £200,000 for 2 months = £3,000
 o £300,000 for 2 months = £4,500
 o Total: £9,000

Saving: £4,500

What could this pay for?

• A new kitchen with fitting.
• Multiple EPC improvements to meet future regulatory standards.
• Legal or valuation fees for refinancing.

Worked example 3: Investor E vs Investor F

Let’s now look at a phased student accommodation conversion requiring £600,000 in total funding, spread over a 9-month build.

• Investor E draws down the full £600,000 on day one.
• Investor F draws:
 o £200,000 month 1
 o £200,000 month 4
 o £200,000 month 7

Interest costs at 0.75% per month:

• Investor E: £600,000 x 0.75% x 9 = £40,500
• Investor F:
 o £200,000 for 3 months = £4,500
 o £400,000 for 3 months = £9,000
 o £600,000 for 3 months = £13,500
 o Total: £27,000

Saving: £13,500

What could this pay for?

• Fire safety upgrades and building compliance.
• Full furnishing package across multiple units.
• Void buffer and marketing costs pre-term.
• Multiple weeks of build contingency.

Benefits for brokers

For brokers, understanding how drawdowns work can help you build smarter funding strategies for your clients, recommend structures that maximise capital efficiency, reduce the cost of borrowing without changing the rate, and position yourself as a value-add adviser who supports long-term returns.

In a market where cost pressures are rising and access to liquidity matters, efficient funding structures are key. Staged drawdowns can provide investors with a smarter way to borrow – giving them greater control, reduced costs, and more flexibility to respond to challenges as they arise.