"Bridging finance can be a complex subject, even in the most straightforward of circumstances."
The use of bridging for refurbishment is growing at pace. In order to cater for those customers who might be best served by exploring this product, it’s important to understand what these projects entail, and what makes for heavy or light refurbishments.
Light refurb
The term ‘light refurbishment’ refers to work that does not require planning permission, but could fall under the Permitted Development Rules (PDR) and may require building regulation approval. It tends to mean smaller, non-structural projects that typically cost less than 15% of the property’s value. This might mean replacing windows, electrical work, installing new bathrooms and kitchens.
This product allows a borrower to take up to a year to undertake smaller jobs that could add considerable value to a property.
For landlords and owner-occupiers alike, the idea of energy efficiency and Energy Performance Certificates (EPCs) is becoming increasingly important, in the face of both the climate and cost of living emergencies. Light refurbishments such as updating fixtures and installing double glazing, for example, might mean jumping up a band – saving money, keeping up with regulatory changes, and adding even more appeal for tenants or purchasers.
This term can also apply to converting a larger residential property into a house in multiple occupation (HMO) for up to six tenants, depending on the extent of the work needing to be done. Or in its more traditional use, it can give borrower a chance to simply fix existing issues or add modern amenities.
Heavy refurb
In comparison, ‘heavy refurbishment’ covers those projects which do necessitate planning permission. These are more extensive works, generally costing above the 15% mark, and are likely to include structural elements. For example, a heavy refurbishment project might mean a change of use, extension, or a complete refit.
Heavy refurbishment is the vital link between surface level improvements and full blown development projects. Whilst it does not cover ground up developments, which call for their own specialist products, a heavy refurb bridge gives a borrower more resources to do work that does not call for the all the development trimmings, but is more challenging and involved than, say, a bathroom refit. It also allows more time – typically up to 18 months.
For landlords, this might mean breaking a larger property into an HMO or multi-unit freehold block (MUFB) for more than six occupants, allowing for greater rental yield and a lower likelihood of void periods. For owner-occupiers, being able to add space through an extension, or gut and modernise a property, can make a vast difference to resale value.
Work with experts
Bridging finance can be a complex subject, even in the most straightforward of circumstances. When it comes to areas of the market that take more work to define and understand, such as light and heavy refurbishment, it is important to partner with an expert.
At Castle Trust Bank, we have redefined our approach to bridging, creating dedicated propositions to help finance heavy and light refurbishment projects, making it more accessible for you to help your clients secure the funding they need for their refurbishment project.
