Refurbishment bridging loans are popular for property developers, investors, and builders needing short-term finance. They’re fast, flexible, and ideal for properties that need work before they’re sold or refinanced.
But if you’re a first-time builder or new to short-term property finance, there’s one thing you need to know before you apply:
The number you’re approved for is not the number you’ll get in your account.
In this guide, we’ll break it all down. No jargon. No sales fluff. Just the real numbers and what they mean for your cash flow.
What Is a Refurbishment Bridging Loan?
A refurbishment bridging loan is a short-term loan that helps you fund renovation works on a property. It’s used for:
- Buying a rundown property quickly
- Funding building works or conversions
- Bridging the gap before refinancing or sale
Loans typically last from 3 to 18 months, and are repaid in full at the end, often when the project is completed and sold or refinanced onto a longer-term mortgage.
Gross Loan vs. Net Loan – What’s the Difference?
Most lenders advertise gross loan amounts. This is the total loan including all fees and interest. It’s the headline number you’re approved for.
But you won’t receive all of it. After interest and other costs are taken out, what’s left is your net loan—the actual money paid to you.
Example:
You’re approved for a £500,000 gross loan.
After fees and interest, your net loan could be around £430,000 or even less.
So if your refurb budget needs the full £500,000, you’re short before you even start.
What Determines How Much You Can Borrow?
1. Loan-to-Value (LTV)
LTV is the loan amount divided by the value of the property. Most lenders will cap this at 75% of the current property value (not future value). Some may go higher if you have extra security.
But be careful:
The higher the LTV, the higher your interest rate and risk.
2. Type of Works
Refurb loans are split into:
- Light Refurbishment (cosmetic work, no structural changes)
- Heavy Refurbishment (extensions, structural changes, planning permission needed)
Heavy refurb loans often involve staged drawdowns—you don’t get all the money up front. Instead, you request funds as the work progresses, and the lender inspects before releasing each stage.
Full Breakdown of Bridging Loan Costs
Let’s go step-by-step through every cost you should plan for.
1. Interest (Retained or Rolled-Up)
You usually don’t pay monthly like a normal mortgage. Instead, the lender deducts all interest in advance from the loan amount.
- If your loan term is 12 months at 1% per month, that’s 12% total.
- For a £300,000 gross loan, that’s £36,000 interest—which might be retained from day one.
This reduces your net loan immediately.
2. Lender Arrangement Fee
This is the lender’s charge for setting up the loan. Usually 1%–2% of the gross loan.
- On £300,000, expect to pay £3,000–£6,000.
3. Valuation Fee
The lender will require a valuation by a RICS surveyor. This cost depends on property value and size:
- Small house: ~£400–£600
- Larger property: £750+
4. Legal Fees (Yours and Theirs)
You pay both:
- Your solicitor’s fees: ~£800–£1,200
- Lender’s legal fees: ~£1,000–£1,500
Always get an early quote to avoid surprises.
5. Exit Fee
Some lenders charge an exit fee when you repay the loan. This can be:
- 0% to 2% of the gross loan
On £300,000, a 1% exit fee = £3,000.
Check your term sheet. Not all lenders charge this, but many do.
6. Inspection Fees (If Staged Drawdowns)
If you’re doing major works, you’ll get the loan in chunks. A surveyor visits at each stage to inspect progress before releasing more funds.
Each inspection costs:
- ~£150–£300
- Multiple stages = multiple fees
7. Broker Fee (If You Use a Broker)
Most brokers charge 1% of the gross loan.
Some include this in your loan; others charge it separately. Always ask.
Don’t Forget Your Build Contingency
Construction always comes with surprises. Pipes leak. Roofs rot. Labour costs rise.
You must include a contingency of 5%–10% of your total build cost.
- £100,000 build = add £5,000–£10,000 extra buffer
Without this, you risk a mid-build cash crisis.
Sample Loan Breakdown (Step-by-Step)
Let’s say:
- Property value: £400,000
- Gross loan agreed: £300,000 (75% LTV)
- Term: 12 months
- Rate: 1% per month
- Works cost: £100,000
- Broker used
Here’s what the deductions might look like:
| Item | Amount |
| Gross Loan | £300,000 |
| Retained Interest (12%) | -£36,000 |
| Lender Fee (2%) | -£6,000 |
| Broker Fee (1%) | -£3,000 |
| Legal Fees (both sides) | -£2,500 |
| Valuation Fee | -£700 |
| Exit Fee (1%) | -£3,000 |
| Net Loan Received | £248,800 |
If your build costs £100,000, you’ll need additional funds—or arrange a staged drawdown.
Add a 10% contingency (£10,000), and you could need £110,000 just for the build alone.
Bottom line: Always work backwards from how much you actually need to fund the refurb and carry contingency.
How to Maximise What You Get
- Aim for lower LTV if you want better rates
- Negotiate fees where possible—some lenders will be flexible
- Plan ahead for all costs before signing anything
- Talk to a trusted advisor—someone who works with builders regularly
Final Thought: Don’t Guess—Calculate
Refurb loans can be powerful tools. They let you move fast, take on more projects, and grow your portfolio.
But only if you know what you’re getting.
Don’t be caught out by gross loan figures that don’t tell the full story. Look at the net loan, total costs, and real cash in hand—before you commit.
Ready to Get Clear, Fast Answers?
We’ve helped hundreds of new and experienced builders get the right funding—without the fluff.
📞 Call John: 07939 091418
📧 Email: john@sunrisecommercial.co.uk
🌐 Visit: www.sunrisecommercial.co.uk
You’ll get straight answers, clear numbers, and real support.
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