Bridging market is ‘buzzing’ about refurbishment loans – Sealey

While this is occurring in the wider economy, the specialist lending industry is buzzing with activity. So, why’s that the case? While a bridging loan may not always be the most suitable option, as it solely depends on what the borrower is trying to achieve, the short-term lending market is niche and can provide a plethora of solutions.

This is especially true for those looking for a refurbishment loan – a type of bridging loan which enables the borrower to complete works to a property.

Typically, refurbishment loans are generally used for two reasons depending on the size of the borrower’s project: those who are looking to undertake light refurbishments (e.g. a new kitchen, bathroom and general decoration works) or projects involving heavy refurbishments (e.g. structural works).

With many investors and developers looking for opportunities to make a larger return on their investment, renovating a property can achieve this by adding significant value to a dwelling. Unlike other types of finance options such as a mortgage, this type of loan can be much more flexible in terms of what can be borrowed.

Demand for refurbishment bridging loans rising

The main challenge with those looking to undergo refurbishment projects is securing the loan in the first place. If the property is derelict and deemed unfit for human habitation, it may not initially be eligible for certain types of mortgages. So, why do so many borrowers turn to specialist lenders?

A bridging loan can usually be arranged much more quickly than a mainstream loan, often in a number of days rather than weeks or months. Most bridging lenders can also be much more flexible as loans tend to be underwritten individually, meaning they can consider individual borrowers’ circumstances.

It also means they can lend on those more complex cases which mainstream lenders often reject. 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.

Over recent weeks, the demand for our refurbishment bridging loans have spiked significantly with a 10 per cent increase in new cases recently received being for this purpose. With a growing number of investors and developers looking for finance solutions to complete refurbishment works, the bridging community undoubtedly has a responsibility to support brokers and borrowers throughout their property journey as they build and develop their portfolios.

Therefore, the need to provide tailored, competitive products will continue to be a priority in 2023.