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In an article produced for FIBA Advantage Magazine, we discuss how investors and developers can use bridging finance to undertake light to heavy refurbishment projects.

Bridging finance can be used by property investors, developers and businesses in a wide range of situations. At Hope Capital, we are a specialist provider of bridging loans up to £5m for a term of up to 18 months. We work closely with brokers in various situations, who are looking to find a short-term finance option for their clients, whether this is for residential, mixed-use, commercial or land purposes.

The Hope Capital team have a significant amount experience supporting borrowers in a variety of situations, including those who are looking at bridging finance as a way to buy a property at auction through to those who need to address mortgage delays, together with many other scenarios.

A particular area Hope Capital have seen recent significant growth, is the demand for refurbishment bridging loans, with 40% of new cases recently received being for this purpose. Simply put, this is a specialist bridging loan issued to cover the costs involved with property refurbishments and typically comprises two categories:

1) those who are looking to undergo light refurbishments or

2) projects involving medium to heavy refurbishments.

Light refurbishment works essentially covers situations where a property needs a cosmetic upgrade and perhaps minor improvements, such as a new kitchen or a new bathroom. Whereas medium to heavy refurbishment tends to cover projects that involve a more structural change to the property.

Refurbishment bridging loans differ from regular bridging loans as they provide the option of multiple drawdowns and also require a fund monitor, or possibly a Quantity Surveyor to check and review the works while in progress.

It is fair to say that the number of investors and developers focusing on refurbishment projects has spiked significantly over the course of the last year. This is likely owing to the new level of opportunity which arose for property investors and developers at the beginning of the Covid-19 pandemic. In addition, there is no doubt the adoption of remote working has increased in recent years, however as a result of the Covid-19 pandemic and the subsequent lockdown restrictions, companies of all types have had no choice but to adapt to having staff work from home, resulting in there being a huge demand for properties that not only accommodate, but can facilitate remote working.

With home-working likely to remain for the foreseeable future, properties developed to fit in with this trend are being snapped up, sometimes within hours of coming to the market, which is why investors and developers are so keen to take advantage of this opportunity.

Often investors and developers opt for a refurbishment bridging loan because of how quickly funds can be made available to start the required works. Additionally, bridging loans are often used in the case where the investor or developer needs to refurbish the property to enable them to move on to a mortgage arrangement. For example, if the property is derelict and deemed unfit for human habitation, it may not initially be eligible for certain types of mortgages. Bridging finance therefore provides the borrower with a solution to complete the necessary works and get the property into a condition where they can either sell the property or obtain a longer-term finance arrangement.

In June 2021, Hope Capital therefore revamped its Refurbishment Range to enhance its competitive offering. The Refurbishment Range, which comprises two products, enables borrowers to undertake light to heavy refurbishment works across all property types. The Refresh product is designed for property which requires relatively minor upgrades and the Renovate product, is suitable for more extensive and advanced projects involving structural work.

The Refurbishment Range provides LTVs up to 75% on non-regulated residential property. It also provides borrowers with the option of a fantastic rate, starting from just 0.80% for loans on residential properties up to £3m. The Refurbishment Range provides up to 100% funding, for a loan term between 3 – 18 months and is available throughout England and Wales.

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