What Is Heavy Refurbishment Finance?
**Heavy refurbishment finance** is a specialist loan product designed for major property renovation projects that go beyond cosmetic improvements. If your project involves structural alterations, changes to the building's footprint, new mechanical and electrical systems, or a change of use requiring building regulations approval, you are in heavy refurbishment territory.
This type of finance sits between a standard [bridging loan](/services/commercial-bridging) (suitable for light refurbishment) and full [development finance](/services/development-finance) (designed for ground-up construction). Understanding where your project falls on this spectrum is important because it determines which lenders are suitable and how the facility is structured.
Light vs Heavy Refurbishment: Where Is the Line?
The distinction between light and heavy refurbishment affects which lenders can fund your project and the terms you will receive.
Light Refurbishment
Light refurbishment typically involves cosmetic and non-structural work that does not require planning permission or building regulations approval:
- Redecoration throughout
- New kitchen and bathroom (like-for-like replacement)
- New flooring and carpets
- Updating fixtures and fittings
- Minor landscaping
- Replacing windows (like-for-like)
Light refurb is usually funded with a standard [bridging loan](/services/commercial-bridging) with a refurbishment facility built in.
Heavy Refurbishment
Heavy refurbishment involves one or more of the following:
- Structural alterations - removing or adding walls, floor strengthening, new openings
- Change of use - residential to commercial, single dwelling to HMO, etc.
- Extension or change to building footprint - adding floors, extending outwards
- Full replacement of building services - heating, electrical, plumbing systems
- Work requiring building regulations approval - fire safety upgrades, insulation, structural changes
- Work requiring planning permission - external alterations, extensions, change of use
- Significant increase in habitable space - loft conversions, basement excavations
**Key Takeaway:** If your project requires planning permission, building regulations approval, or involves any structural work, it will be classified as heavy refurbishment by most lenders. This means you need a specialist heavy refurb or development finance facility rather than a standard bridging loan.
How Heavy Refurbishment Finance Works
Facility Structure
Heavy refurbishment finance shares characteristics with both bridging and development finance:
- Day-one advance to fund the property purchase (or release equity if already owned)
- Refurbishment drawdowns released in stages as work progresses
- Interest rolled up and repaid at the end of the project
- Short-term duration typically 12-18 months
- Monitoring surveyor inspections before drawdowns (for larger projects)
Typical Parameters
| Parameter | Heavy Refurb Range |
|---|---|
| LTGDV (end value) | 65-75% |
| Purchase LTV | 70-75% |
| Refurb cost funding | Up to 100% |
| Term | 9-18 months |
| Interest rate | 7-11% pa |
| Arrangement fee | 1-2% |
| Minimum loan | £150,000 |
Drawdown Mechanism
For projects with refurbishment costs under approximately £250,000, some lenders release funds in just **2-3 tranches** (start, midpoint, completion) rather than the 5-7 stages typical of full [development finance drawdowns](/knowledge-hub/development-finance-drawdowns-explained).
For larger refurbishments (£250,000+), the drawdown structure mirrors development finance with a monitoring surveyor certifying each stage.
Types of Heavy Refurbishment Projects
Residential Renovation
Acquiring a run-down residential property and undertaking major works to bring it to modern standards or significantly increase its value:
- Full strip-out and rewire
- New heating system
- Structural alterations to improve layout
- Loft conversion or extension
- Basement excavation
- New kitchen and bathrooms throughout
HMO Conversions
Converting a standard dwelling into a **House in Multiple Occupation (HMO)** involves significant work:
- Fire safety upgrades (compartmentation, detection, fire doors)
- Additional bathrooms and kitchens
- Sound insulation between rooms
- Possible structural alterations to create bedrooms
- Compliance with HMO licensing requirements
Commercial to Residential
Converting commercial premises (shops, pubs, offices) into residential dwellings. Where [permitted development rights](/knowledge-hub/permitted-development-finance-conversions) do not apply, these conversions require full planning permission and are funded as heavy refurbishment.
Listed Building Renovation
Renovating **listed buildings** is inherently heavy refurbishment due to the specialist requirements:
- Listed building consent for most alterations
- Use of traditional materials and methods
- Conservation officer involvement
- Higher costs and longer timescales
Mixed-Use Renovation
Refurbishing a [mixed-use building](/knowledge-hub/mixed-use-development-finance) with both commercial and residential elements, potentially involving change of use for some floors.
Build Cost Considerations
Typical Heavy Refurbishment Costs
| Scope | Cost per sq ft (approx) |
|---|---|
| Structural alterations only | £60-£100 |
| Full internal refurbishment | £80-£130 |
| Refurb plus extension | £100-£160 |
| Listed building renovation | £120-£200+ |
| Full gut and remodel | £110-£170 |
Cost Risk in Refurbishment
Refurbishment projects carry **higher cost risk** than new build because:
- Hidden defects are not visible until strip-out begins
- Structural issues may only become apparent when finishes are removed
- Asbestos and hazardous materials in older buildings
- Non-standard construction in period properties
- Building regulations compliance may require more work than initially anticipated
- Listed building requirements can add cost and complexity
A contingency of **15-20%** is recommended for heavy refurbishment, compared to 5-10% for new build.
**Key Takeaway:** Always commission a thorough building survey before purchasing a property for heavy refurbishment. The cost of a comprehensive survey (£1,000-£3,000) is negligible compared to the risk of discovering a £50,000 structural issue after completion.
Lender Requirements
Experience
Lenders assess the borrower's experience relative to the project complexity:
- Simple heavy refurb (one residential unit, no change of use) - some lenders accept limited experience
- Multi-unit conversions - most lenders want evidence of at least one completed project
- Listed buildings - lenders strongly prefer experienced borrowers with heritage project track records
Professional Team
For heavy refurbishment, lenders want to see:
- Architect or designer with relevant experience
- Structural engineer (if structural works are involved)
- Building contractor who is experienced, insured, and capable
- Quantity surveyor for projects above approximately £500,000 build cost
Planning and Regulatory Approvals
Lenders require:
- Planning permission granted and conditions discharged (or capable of discharge)
- Listed building consent where applicable
- Building regulations application submitted or approved
- Party wall agreements in place where relevant
Insurance
Key insurance requirements:
- Buildings insurance on the existing structure from day one
- Contractor's All Risks covering the works
- Public liability minimum £5m
- Structural warranty or Professional Consultant's Certificate (PCC) for the completed works
Heavy Refurbishment vs Development Finance: Which Do You Need?
The classification affects which lenders are available and how the facility is priced:
| Factor | Heavy Refurbishment | Full Development Finance |
|---|---|---|
| Structural work | Yes, within existing footprint | Yes, including new structures |
| New build element | Minor extensions only | Ground-up construction |
| Drawdown stages | 2-5 stages | 5-8 stages |
| Monitoring | Sometimes required | Always required |
| Typical lenders | Bridging and specialist | Development finance specialists |
| Rate range | 7-11% pa | 7-12% pa |
| Experience needed | Moderate | Higher |
Some projects fall in a grey area. A large-scale conversion with significant structural work might be classified as development finance by some lenders and heavy refurbishment by others. Your broker can advise on the optimal classification for your project.
Exit Strategies
Sale of Completed Property
Sell the refurbished property on the open market. For single units, this is straightforward. For multi-unit conversions, sales may take longer and [development exit finance](/knowledge-hub/development-exit-finance-guide) may be needed.
Refinance to Long-Term Mortgage
Retain the property and refinance to a [commercial mortgage](/services/commercial-mortgages), buy-to-let, or HMO mortgage based on the enhanced value. This is a popular exit for investors building a rental portfolio.
Refinance to Bridging
If the property is not yet sold or long-term refinance is not immediately available, a short-term [bridging loan](/services/commercial-bridging) can replace the heavy refurb facility while you complete the exit.
Case Study: Victorian House to 5-Bed HMO
To illustrate how heavy refurbishment finance works in practice:
**Property**: Detached Victorian house, 2,200 sq ft, in a university city **Purchase price**: £320,000 **Refurbishment cost**: £185,000 **End value (as HMO)**: £575,000 **Rental income**: £3,200/month
**Finance structure**:
- Facility: £430,000 (75% of end value)
- Day-one advance: £230,000 (72% of purchase price)
- Refurbishment drawdowns: £185,000 (100% of costs) in 3 stages
- Retained interest: £15,000
- Term: 12 months
- Rate: 8.5% pa rolled up
- Arrangement fee: 1.5% (£6,450)
**Exit**: Refinanced to a specialist HMO mortgage at 75% LTV (£431,250) based on rental income of £38,400 pa.
**Developer equity required**: £97,000 (purchase deposit + professional fees) **Approximate profit on refinance**: £145,000 (plus an income-producing asset retained)
Tips for a Successful Heavy Refurbishment Project
- Survey thoroughly - invest in a comprehensive building survey and any specialist surveys (structural, damp, asbestos) before committing
- Budget conservatively - include 15-20% contingency on refurbishment costs
- Plan the exit early - arrange your refinance or sales strategy before starting work
- Use experienced contractors - refurbishment work requires different skills from new build
- Manage the programme - delays on refurbishment projects are common due to unforeseen issues
- Communicate with your lender - if you discover unexpected issues, inform your lender early rather than waiting for a drawdown inspection to reveal the problem
Finding the Right Lender
Heavy refurbishment sits in a niche that not all lenders cover. Key lenders with appetite include:
- Bridging lenders with heavy refurb products - offering facilities up to approximately £500,000 refurb cost
- Development finance specialists such as Shawbrook, Hampshire Trust, and Aldermore
- Challenger banks including Allica Bank, Atom Bank, and Paragon
- Private funds for complex or higher-leverage requirements
A specialist broker with relationships across these lender types can identify the most suitable option for your specific project. [Contact our team](/contact) to discuss your refurbishment project.
Summary
Heavy refurbishment finance bridges the gap between standard bridging loans and full development finance, providing structured funding for major renovation projects. Understanding whether your project qualifies as light or heavy refurbishment, preparing thorough cost estimates with adequate contingency, and presenting a clear exit strategy are the keys to securing competitive terms.
With the right preparation and professional guidance, heavy refurbishment can be a highly profitable strategy for adding value to underperforming properties.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*