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We are often asked what the capital requirements are for a small refurb bridge loan and the following will give an overview of the typical requirements for a bridging or refurbishment project.
Capital Requirements for a Small Refurb Bridge Loan
Typical Bridging / Refurbishment Project
On a bridging loan, a typical loan-to-value (LTV) is around 75% (this can vary depending on the lender and project – we can get up 85% LTV but not on small loans).
For example, on a £60,000 purchase price, the lender may offer a gross loan of £45,000. After deducting interest and fees, the net loan is likely to be in the region of £38,000, which can be applied toward the purchase. As well as having the cash to cover the balance of the purchase price, you would still need to cover the following upfront costs as well:
Land tax / Stamp: £1,800
Lender’s legal fees: £500 – £1,750 + VAT
Your legal fees: (subject to your solicitor)
Valuation fee: £500 – £1,500 + VAT
QS / Asset Manager report (if refurbishment): £500 – £1,800
Monitoring visit fees: £300 – £900 + VAT per visit
Capital Requirements for a Small Refurb Bridge Loan Structure
If the project involves refurbishment, lenders will often fund up to 100% of the works, provided there is sufficient uplift in value.
However, this is typically structured on a drawdown in arrears basis, meaning you must fund the works upfront, then claim reimbursement from the lender in stages, for example:
Total works: £30,00, split into 2 drawdowns:
You complete and fund £15,000 of works
Submit for drawdown and get reimbursed
Repeat the process for the remaining works
This “recycle and draw” approach continues until the project is complete
The number and size of drawdowns will vary depending on the lender and project specifics
Key Considerations & Loan Size Constraints
A net loan of £38,000 with £15k–£20k works is below the minimum loan size for many lenders.
This reduces available options
Typically results in higher interest rates
Minimum Drawdown Requirements
Some lenders impose minimum drawdown amounts (e.g. £20,000).
– If works total £30,000, you may need to fund the £30,000 upfront, then reclaim it
– Some lenders have a minimum drawdown, for example £20k, which means if the works were say £30k you would need to fund the first £30k and then claim this back and then fund the remaining £10K and then claim that £10k back
Would You Like to know more?
If you have questions about your capital requirements for a small refurb bridge loan then contact us today on 01244 953 360. Alternatively, email us here and we will be pleased to get back to you.
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For more information on Capital Requirements for a Small Refurb Bridge Loan talk to Developer Money Market