What you need finance wise will depend purely on the level of work the property requires. Do you require finance for light cosmetic work meaning painting, new carpet, flooring, kitchen or bathroom? Or would you be leaning to more heavy duty works i.e knocking through walls, changing the layout of rooms within the exiting property etc, or somewhere in between.

If you fall into category of ‘I/we require finance to complete heavy duty works’ then bear in mind some of this may involve changes to planning permission to allow works to happen. A lender will consider any structural changes as heavy duty works and you would need to submit proof that you have been granted permission to complete this works on the loan application.

Lenders may take up the option to grant you a loan to purchase the property and providing the entire financials stack up, advance you additional funds to complete the necessary renovation works. In cases like this, it is more than like their lender will send a representative to view the property before they decide to release further funds for additional works to be carried out. This is known commonly in the industry as development milestones. Once certain milestones have been completed then funds are released as the risk exposure to the lender becomes less.

Depending on the strength of the applicant and the project is favourable 75% LTV (Loan to Value) is a realistic projection to purchase a property.  This means if the property is valued at £250,000 a lender may consider lending up to 75% of the value of the property (£187,500). After this you can then begin to factor in 100% cost arrears which are likely to be subject 70% of the property value once all works are completed. It is important to work with lenders that are prepared to offer:

Attractive interest rates

Rolled Up interest

Options with minimal exit fees

Terms from 3 to 18 months

100% funding if additional security is provided

Drawdown milestone payment facility

The percentages quoted above are gross loan percentages i.e. before interest and fees are deducted.

You will need to compile the basic information most lenders require to gain any loan approval. For an individual or Company these tend to be the following:

Contact Info

Company Info

Director Details

Property Details and any supporting planning information

Property Valuation

Schedule of Works – This supports your business case for the property and exit strategy. This will include a detailed list of all works required to be done to the property and the main contractors that will be used to complete this.

Your background and property experience

Funding requirement

Proof of funds (deposit) and any additional security available to secure funding if required.

As interest rates and fees vary from lender to lender before you enter any deal it is wise to try an obtain an illustration of what a potential deal may look like if you were to proceed with a loan application. In some cases it may be more prudent to use a broker who has access to the whole of market to find you the best possible deal. These are list of fees or considerations to factor in:

Interest Rate

Product Fee – Usually payable on application

Valuation Fee – Usually payable on application

Assessment Fee

Funds Transfer Fee – Usually deducted from the advance

Loan Exit Fee – Usually 1% of the loan amount

Broker Fee

Solicitors & Conveyancing Fees