You've found a property with potential. It's structurally sound but cosmetically dated. Or maybe it needs serious work—kitchen, bathrooms, rewiring, the lot. The price reflects the condition, which means there's profit in the deal. But you need capital to unlock it.
This is where refurbishment finance comes in. It's short-term funding specifically designed for property renovations—whether you're flipping for profit, converting to an HMO, or upgrading a buy-to-let before refinancing.
In this guide, we'll explain exactly how refurbishment finance works, what it costs, how staged funding operates, who qualifies, and how to structure deals that actually make money rather than just burning through capital.
What Is Refurbishment Finance?
Refurbishment finance is a type of short-term bridging loan that covers both the property purchase and the renovation costs. Instead of needing all your refurb money upfront, the lender releases funds in stages as work progresses.
Key Features:
- Loan-to-value: Up to 75% of purchase price + refurbishment costs
- Term: 12-24 months (typical)
- Interest rates: 0.75% - 1.5% per month
- Staged drawdowns: Funds released as work completes
- Exit strategy: Refinance, rent, or sell
How Does Staged Funding Work?
The key advantage of refurbishment finance is staged funding. You don't need to front all the renovation costs yourself—the lender releases money as work progresses.
Here's How It Works:
Example: Three-Bed House Refurbishment
Purchase price: £180,000
Planned refurbishment: £40,000
Total project cost: £220,000
Lender advances: 75% = £165,000
Your deposit required: 25% = £55,000
The Funding Stages:
Stage 1: Purchase
Lender releases £135,000 (75% of purchase price) at completion. You've now bought the property.
Stage 2: First Works Completed (e.g., 30%)
You complete kitchen installation and bathroom upgrades. Surveyor inspects. Lender releases £12,000 (30% of £40k refurb budget).
Stage 3: Second Works Completed (e.g., 60%)
You complete flooring, decorating, rewiring. Surveyor inspects again. Lender releases another £12,000.
Stage 4: Final Completion (100%)
All work finished. Final inspection passed. Lender releases the remaining £16,000.
Staged funding protects the lender (they're not advancing money for work that hasn't happened) and helps you manage cash flow (you're not funding the entire project upfront).
What Types of Projects Qualify?
Refurbishment finance works for various property renovation projects. Here are the most common:
Light Refurbishment
Cosmetic upgrades: new kitchen, bathroom, flooring, decorating. Property is habitable but dated.
Typical cost: £15,000-£40,000
Heavy Refurbishment
Structural work, rewiring, replumbing, roof repairs. Property needs significant renovation to be habitable.
Typical cost: £40,000-£80,000+
HMO Conversions
Converting standard houses into multi-tenant HMOs. Includes loft conversions, additional bathrooms, fire safety.
Typical cost: £30,000-£80,000
Extensions & Additions
Adding bedrooms, bathrooms, or living space. Single-storey extensions, loft conversions, garage conversions.
Typical cost: £20,000-£50,000+
How Much Does Refurbishment Finance Cost?
Refurbishment finance costs more than standard mortgages because it's short-term and higher risk. But it's comparable to standard bridging loans.
Interest Rates
Expect to pay 0.75% - 1.5% per month, which translates to roughly 9-18% annually. Your specific rate depends on:
- Loan-to-value: Lower LTV = better rates
- Property type: Standard residential gets better rates than complex projects
- Your experience: Track record in property refurbishment matters
- Exit strategy: Strong, credible exit = lower rates
Cost Example
Loan amount: £165,000
Interest rate: 1% per month
Term: 12 months
Total interest cost: £19,800
If your refurb adds £60,000 in value, you've still made £40,000 profit after interest.
Additional Fees
- Arrangement fee: 1-2% of loan amount
- Valuation fee: £300-£1,500 (depending on property value)
- Legal fees: Your solicitor + lender's solicitor (£1,000-£2,000 total)
- Monitoring surveyor fees: £500-£1,500 (for staged inspections)
- Exit fees: Some lenders charge 1% on repayment
Exit Strategies for Refurbishment Finance
Like all bridging finance, refurbishment loans require a credible exit strategy. You need to show the lender how you'll repay within 12-24 months.
Refinance onto BTL Mortgage
Complete the refurb, get the property tenanted, then refinance onto a standard buy-to-let mortgage. Most common exit strategy.
What you need:
- • Mortgage in principle
- • Evidence of rental income
- • EPC, Gas Safety, EICR
Sell for Profit (Flip)
Refurbish to a high standard, then sell. Sale proceeds repay the loan. Higher risk but potentially higher reward.
What you need:
- • Comparable sales evidence
- • Estate agent valuations
- • Realistic timelines
Refinance onto Residential Mortgage
If you're refurbishing to live in the property yourself, refinance onto a residential mortgage once work is complete.
What you need:
- • Mortgage in principle
- • Proof of income
- • Clean credit history
Development and Sale
For larger projects involving significant structural work or conversions. Sell the finished property to repay the loan.
What you need:
- • Detailed build costings
- • GDV evidence
- • Realistic timelines
Who Qualifies for Refurbishment Finance?
Refurbishment finance is more flexible than traditional mortgages, but lenders still have criteria:
What Lenders Look For:
1. Credible Exit Strategy
You need a realistic plan to repay. Mortgage in principle, sales evidence, or buyer interest.
2. Adequate Equity
You'll need 25-30% deposit covering purchase + refurb costs.
3. Realistic Refurbishment Plan
Detailed costings, contractor quotes, and timelines. Lenders want to see you've thought it through.
4. Property Must Stack Up
The property's end value (GDV - Gross Development Value) must justify the total investment.
5. Experience Helps (But Isn't Essential)
First-time refurbishers can get finance, but experienced investors get better rates and higher LTVs.
Common Refurbishment Finance Mistakes
Mistake 1: Underestimating Costs
You budget £25k for refurb. It costs £45k. Now you're stuck halfway through.
Solution: Get detailed quotes. Add 20% contingency.
Mistake 2: Unrealistic Timelines
You think refurb will take 3 months. It takes 8 months. Interest costs spiral.
Solution: Build in buffer time. Contractors are always optimistic.
Mistake 3: Over-Improving for the Area
You spend £60k creating a luxury finish in an area where similar properties sell for £180k. You can't get your money back.
Solution: Refurb to the level the local market supports, not beyond.
Mistake 4: No Exit Plan
You assume refinancing will be easy but haven't checked mortgage criteria or rental demand.
Solution: Get mortgage in principle before starting. Know your exit is viable.
Mistake 5: Using Cheap, Unreliable Contractors
You hire the cheapest quote. Work is poor quality, takes twice as long, or isn't finished.
Solution: Use reputable contractors with references. Quality costs, but delays cost more.
The Bottom Line
Refurbishment finance is one of the most powerful tools for property investors. It lets you buy properties below market value, add value through renovation, and either sell for profit or refinance into long-term rentals.
Done right, it's how you build a portfolio systematically—buying, improving, refinancing, extracting capital, and repeating. Done wrong, it's a cash drain that leaves you stuck with half-finished projects and mounting interest costs.
The key is preparation: detailed costings, realistic timelines, credible exit strategies, and working with lenders who understand property refurbishment.
At Black Props, we finance refurbishment projects regularly. We know which deals work, how to structure staged funding properly, and how to help investors execute projects that actually deliver returns.
If you've found a property with potential and need finance to unlock it, let's talk. We'll help you structure refurbishment finance that turns tired properties into profitable investments.