Options For Refurbishment & Conversion Loans

Yorkshire Finance

Refurbishing or converting a property?  Here is some information about the differing types of funding available.

There are a wide variety of loan types, structures and costs associated with conversion schemes.

The assumption is that a building is to be purchased, and this will then be altered and/or upgraded into improved and/or different accommodation. This usually means the creation of apartments or other residential accommodation from what was a commercial building.

The first consideration is the quantum of funding required. Do you have enough to fund the development costs yourself plus, say c. 35% of the acquisition cost?  If so (and you have experience of similar schemes) when it is possible to obtain a straight forward interest only loan at about 10% per annum. This is the simplest loan structure – there is little or no monitoring by the lender and you are free to progress the scheme without further ado.

Do you need funding for the development costs?  Then there is a plethora of funders available, and we will aim to get the best available for you.  If you are experienced, and can contribute 40% of the purchase price and development costs we can obtain funding at rates starting from 4% per annum. The lender will charge you a set up fee of 1.5%, and an exit fee of 1.5% based on the loan used.

If you require more funding than this, then the next tranche of lender will coast you around 7% per annum, with a 2% set up fee and 1.5% exit fee, again based on loan used. Again you have to have a reasonable track record.  They will however fund 75% of costs and 65% of GDV, including interest accrual;

Beyond this, there are lenders who will fund up to 90% of costs, leaving the applicants only requiring perhaps 35% of the building purchase costs, perhaps less. These funders may charge between 0.9% and 1.4% per month dependent on loan size and the risk assessment, plus set up and exit fees of about 2%. Experience is not always necessary – although a credible scheme is and we will help you with presenting your scheme so that it is credible.

Then there are the peer to peer lenders – they may be less easy to work with, but can provide funding of 80% of scheme costs at around 10% per annum. They generally require experience.

There are lots of options available.  Don’t pick the wrong one – it may cost you money, time and stress!


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