A Closer Look at Refurbishment Finance

Considering finance for a refurb? Here’s a closer look at the ins and outs of utilizing it.

Numbers

Although this may seem somewhat obvious, a refurbishment proposal made tends to be almost unbelievable in regard to how much is being requested.

This is often based upon the assumed value of the property, as well as what the value will be of that property once the refurbishment process has been completed.

Looking at the numbers, you have to be careful in crafting a realistic budget and thinking about the timeframe during which the money will be used. There are some cases where it may not be necessary to refurbish a property, especially requiring a sizable amount of money, plus the bridging loan itself could actually prove to be very unprofitable.

Legals

Bridging can sometimes be a very complex process to consider which may require working with solicitors that are familiar with them. For example, someone could request a residential bridge loan, one that they will need to obtain very quickly, so that they can use that money to purchase a home before they have sold theirs.

If you work with solicitors, they can certainly help you, especially creating the paperwork necessary to make the process as expedited as possible.

There are some lenders that will refer law firms to you, especially if you have never done this before, as it will give them confidence about you requesting the money.

Papers

It is vitally important to have all of the documents that you will need to go through this process which will include bank statements, planning permissions, ownership information, company accounts, and many other documents that will certainly be necessary with a heavy refurbishment loan. If you don’t have them, you should not even consider applying for one.

The old saying that you need to have your house in order certainly applies, simply because the rest will literally follow. By working with a seasoned lending manager that can assess the viability of the loan that you want, they may actually help you in making your application go through, plus verify that you have all of the documentation that will be needed.

If you do find someone to help you, when you make your request, the lender will be much more confident, and may approve your loan right away; you may even get a lower rate of interest by working with these professionals.

Exit

Creating an exit plan is absolutely necessary. If it is not the most important aspect of this process, it is certainly one of the most important for getting a heavy refurbishment bridging loan.

To be honest, everyone is looking to make a profit, and avoid heavy losses, all of which can be avoided if you do your proper research, have your information in order, that will ensure your success.

You may also benefit from speaking with architects, quantity surveyors, and even tradesmen that can assist you with this process. You may not even have to pay them for this information, but even if you do, their professional experience will be very valuable if you are trying to obtain a loan in this manner.

Let’s say that you are trying to obtain a long-term mortgage, and this is for rental purposes so that you can make a short-term profit. If you have all the details in order, your application will likely be approved for this reason.

Contingency

This is something that most people will overlook which is a mistake. They are looking at the situation from a glass half full perspective, instead of trying to anticipate the problems that may arise when you are trying to obtain money for a property development.

In the bridging world, if you are the borrower, your proposal needs to be foolproof; you should not say outlandish things or make claims that have no basis, in the reality of the situation.

Although it would be nice to make a substantial profit, which can only happen if you get the money, it should never sound outrageous if you are trying to get a lender to actually give you a loan.

Therefore, a contingency plan needs to be in place if you are denied. There could be situations where the weather will make it impossible for you to move forward, or you may have workers that will not show up for weeks, which can compromise your plans.

Although all of this can be very difficult to think about, you need to be prepared for potential problems that may arise, and have solutions in place that will make your lender more confident about your proposal.

We should also mention that it’s easier to make these proposals when there is no pressure, and you have more time, to complete a project, yet there are some large projects that may lead to difficulties if you are not properly prepared.