How to Finance a Renovation or Refinance Project

Waqas Ali
Jan 19
3 min read

Making Money from Potential

A tired house, an old flat, or a building that others overlook can hold incredible investment potential — but to unlock that potential, you need the right financial structure.

At Genius Academy, we teach investors that finding good deals isn’t enough—you must also know how to fund them wisely. Your funding strategy affects your profit, speed, and flexibility, whether you’re raising money for a short-term renovation or planning a long-term refinance.

Why Financing Improvements Is Different

Renovation projects don’t usually qualify for a standard mortgage because:

The property may be uninhabitable (no kitchen, bathroom, or heating).
The value changes dramatically once the work is complete.
The lender needs to know your exit strategy — how you’ll repay or refinance after the work.

That’s where specialised renovation financing comes in, offering more flexible options than traditional banks.

1️⃣ Bridging Finance: Fast and Adaptable

A short-term loan (usually 6–18 months) used to buy and renovate a property quickly — especially when it’s not mortgage-ready.

Main Benefits:

🕒 Quick setup: typically 1–3 weeks.
🔨 Ideal for auction purchases or structural projects.
💸 Interest is rolled up, so you make no monthly payments during works.

Example: You buy a property for £150,000 with a bridging loan, spend £30,000 on refurbishment, and refinance at a new value of £230,000. After repaying the bridge and costs, you’ve released equity and built long-term cash flow.

2️⃣ Refurbishment Finance: Funding the Works

Refurbishment loans cover the cost of improvements, not just the purchase.

Two Main Types:

Light Refurbishment: cosmetic works — new kitchens, bathrooms, flooring, and decoration.
Heavy Refurbishment: structural changes, extensions, or converting property use.

Funds are often released in drawdowns (stages) as the project progresses.

Typical Terms:

Loan-to-Value (LTV): 65–75% of purchase price
Works funded: up to 100% (subject to experience and exit plan)
Term: 6–12 months

3️⃣ Refinance: Turning Short-Term Debt into Long-Term Profit

Once the work is complete and the property has increased in value, investors typically refinance onto a buy-to-let mortgage.

This allows you to:

Pay off the bridge or refurbishment loan.
Secure a lower, long-term fixed rate.
Extract capital from the new valuation.

This final stage—the “R” in BRR (Buy, Refurbish, Refinance)—lets you recycle your funds into the next project.

Example: Buy: £150,000 Refurb: £30,000 Revaluation: £230,000 Refinance at 75% LTV → £172,500 released (enough to repay the bridge and free up funds for the next deal).

Comparing Different Finance Options

Type of Finance	Typical Term	Speed	Typical Rate	Primary Use Case
Bridging Loan	6–18 months	Fast	1.2%–0.8% per month	Purchase + Works
Refurbishment Loan	6–12 months	Medium	0.9%–1.1% per month	Planned Renovations
Buy-to-Let Mortgage	2–5 years	Slower	4%–6% per year	Long-Term Refinance

Smart Tips for Investors

Always have an exit plan. Lenders need to know whether you’ll sell or refinance after completion.
Build a trusted team. A broker, solicitor, and surveyor experienced in bridging finance are worth their fees.
Account for fees and interest. Expect setup, valuation, and exit fees — plus monthly interest if not rolled up.
Allow extra time. Projects often run over schedule; add a buffer before your refinance date.