What is the Difference Between Heavy and Light Refurbishment Loans?

So, you know you need a renovation mortgage, but at what point does a light refurbishment become a heavy one? Read on to find out.

What Can a Light Refurbishment Loan Be Used for?

Light refurbishment typically refers to activities which cost less than 15% of the property’s total value and usually involves cosmetic or required safety updates, such as:

  • Redecoration, such as plastering, painting, or laying flooring.
  • Replacing fixtures and fittings, including a new kitchen or bathroom.
  • New windows, doors, or outside rendering.
  • Rewiring or replumbing.

Most commonly, a light refurbishment mortgage or loan is used to purchase a rental property in need of repair at low cost and improve it, so it meets letting standards. Transforming properties into HMOs is also commonplace with this kind of finance.

Due to the nature of the work being carried out, the terms on these loans are short – the typical term is just 6 months long.

When Might You Need a Heavy Refurbishment Mortgage?

A heavy refurbishment is much more extensive than a light refurbishment. It will cost at least 15% of the property value and will often require planning permission, architect’s drawings and building regulations. This could involve anything from structural work for a change of use or a small extension, to a full gut job or building a super basement.

As the works carried out are more extensive than with a light refurbishment, the loan term is longer. Typically, a heavy refurbishment loan will have a term of 12 to 24 months, following which the property is revalued and refinanced.

So, Which Finance Will Suit Your Property Project Best?

When it comes to deciding which you will require, it is important to cost up your planned works and compare them to the end value. Remember: 15% is the point at which most lenders define whether a property project is a light or heavy refurbishment.

Furthermore, we would always recommend doing research into the local market and the prices properties are currently selling for. Everywhere has a ceiling price and, if a heavy refurbishment will mean your investment is greater than the return, it may not be worth your time and a light refurbishment should be carried out instead.

Of course, there are alternative forms of short-term finance available. If a refurbishment loan does not feel like a good fit, have you considered bridging finance? On the other hand, if your job will involve ground-up development, you may require development finance instead.

If you’re planning a property project and will require funding, get in touch with our experienced brokers today and we can discuss your financial requirements and which loan will suit you best.

Article By Luke Egan

March 10th, 2021

Luke heads up our specialist property finance team where his focus is to drive our transactions valued between £100k and £5m.

Luke and his team manage enquiries from initial enquiry through to redemption. Luke also sits on the internal credit committee with Ben and Tom.

Luke joined Pure back in 2014 following a successful role in the Barclays property finance team that lasted over 8 years.

See more articles by Luke

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