How to Finance a Property Renovation

Renovating a property is a powerful way to increase its market value… but the real opportunity lies in how you finance that renovation. Whether you’re a seasoned developer or a first-time renovator, understanding the funding options available and how they impact your Loan-to-Value (LTV) ratio can significantly improve your borrowing potential.

So, let’s explore smart ways to finance a property renovation, and how the uplift in value from your improvements can enhance your LTV position.

Why Renovating a property is a Smart Financial Move

Property renovations do more than make a building look better, they increase its value. This increased value improves your Loan-to-Value ratio, meaning lenders may be more willing to offer:

• Higher borrowing amounts
• More competitive interest rates
• Access to specialist finance products

By strategically financing your renovation project, you can boost the property’s post-renovation valuation (also known as the Gross Development Value or GDV) a key factor when applying for short-term or development finance.

5 Ways to Finance a Property Renovation

1. Refurbishment Bridging Loans

Perfect for short-term projects, refurbishment bridging loans are designed specifically for value-adding work ranging from cosmetic upgrades to light structural changes. Many lenders will base the loan amount on the post-renovation value, not just the current value.

• Best for: Quick refurbs, flips, or increasing property value for refinance.
• LTV Advantage: You’re borrowing against a higher GDV, improving the LTV picture from the outset.

2. Development Finance

If you’re undertaking more substantial renovations, such as conversions, extensions, or full reconfigurations, development finance can fund both the property purchase and the build costs in stages.

• Best for: Large-scale projects with clear exit strategies.
• LTV Advantage: Funding is often calculated against the GDV, meaning you can raise more capital upfront if the project shows strong value uplift potential.

3. Second Charge Mortgages

If you already own a property with equity but don’t want to remortgage, a second charge loan could offer the extra funds needed for renovations.

• Best for: Homeowners or landlords with an existing mortgage.
• LTV Advantage: As value increases post-renovation, your total equity rises, allowing future refinancing at a lower LTV.

4. Remortgaging

If the property already has some value or you’ve completed part of the renovation, remortgaging could unlock capital to fund the remaining work.

• Best for: Mid-to-long-term funding, especially if interest rates are favourable.
• LTV Advantage: You can access better rates by remortgaging at a lower LTV once the value has increased.

5. Further Advance from Your Current Lender

An often-overlooked option, a further advance allows you to borrow more from your existing lender to fund renovations.

• Best for: Smaller renovation projects or improvements to a primary residence.
• LTV Advantage: Ideal for homeowners with low current LTV looking to invest in their property’s value.

How Renovations Help Optimise Your LTV

Let’s say you purchase a property for £200,000 and borrow £150,000 – your LTV is 75%. After a £30,000 renovation, the property is revalued at £280,000. Now, that same £150,000 loan only represents just over 53% LTV – a significant improvement. This lower LTV opens the door to cheaper refinance products or allows you to raise more capital for your next project.

Read more on how LTV is calculated and why it matters here.

Final Thoughts: Finance the Renovation, Unlock the Value

Financing a renovation isn’t just about funding the build – it’s about strategically leveraging value uplift to optimise your LTV and improve your financial position. Whether you’re flipping a property, increasing rental yield, or simply adding equity to your home, the right funding method can make all the difference.

At Pure Property Finance, we specialise in tailored solutions that take the end value of your project into account, helping you to borrow smarter and unlock more opportunities

Thinking of Renovating a property?

Get in touch with our expert team today to discuss the best finance options for your project and how we can help you turn renovations into real financial gains.