Property renovation: access to finance explained

IN: Personal Guides

Whether you’re buying-to-let or have plans to sell, renovating a property can bring in an impressive profit if done correctly. However, you’ll need to do plenty of research into the market in order to succeed and minimise the chances of things going wrong.

undefinedThe good news is that the housing market is finally beginning to show some signs of recovery. Thanks to government funded initiatives such as the Help to Buy scheme, new home buyers are being enticed into the market - so sellers shouldn’t have any shortage of interested parties.

In this post, we’ll give an overview of the world of property renovation and the funding options available to help your project run as smoothly as possible.

Location, location, location

Some people automatically think that the perfect property is the nicest house, on the nicest street, in the nicest town - but that is not always the case. This type of property is going to set you back an incredible amount of money. When buying a property as a renovation project, you need to think about who you’re targeting with the finished product - whether that’s single people, families, young professionals, students or the retired. If you’re renovating a property that appears to be ideal for families, for example, then it needs to be near a school. Public transport nearby and green areas are just two other essentials that can really help to add value.

Negotiate cost to increase chance of profit

When you have found a property that you want to buy, you need to do everything in your power to get it at the right price. Every pound you can knock off the asking price is another pound in your pocket. The higher the price you pay, the less chance you have of making a respectable profit because you are really limiting your margins.

Do your research

Whether you’re buying a house to live in or to renovate in order to sell at a profit, choosing the right property requires plenty of research. Watching Sarah Beeny and Phil Spencer on the TV isn’t enough, you need to look in depth at the market and speak to everyone you can to find out more about the area you are thinking of buying in. You could make a fortune, but if you don’t do enough research beforehand, you could find yourself in debt and left with an empty property that you have spent so much time, energy and most of all, money, renovating.

Talk to your estate agent to find out who is looking to sell their property quickly, so you can get a better indication of where you might get a great price. People moving abroad or changing circumstances are likely to be keen to accept offers just to get rid of the property soon.

Investigate the location in depth to find out as much as you can. Contact the local authority planning department to find out how many houses have been built recently to gain an insight into whether or not the area is developing. If you can, find out whether any construction work has been given the go-ahead nearby that could make the area less desirable.

Improving the property

The fundamental principle of buying a property in order to renovate it is to buy low and sell high. If you know that the house will need plenty of work doing to it, then try to get it as cheap as possible so that you can put the spare cash towards improvements. Look for properties that will be extremely desirable after a little bit of TLC. Before you make a purchase, have a good think about how you can add a personal touch to the establishment and turn it into a sought after home.

  • Minor improvements

Basic decorating is an easy and fast way to bump up the value of a property. Don’t decorate it too much to your own personal taste, as you’ll exclude a number of potential buyers who don’t feel the same about having a bright yellow living room and purple bedrooms. Keep everything as neutral as possible.

  • Converting the property

In some cases, you may be able to transform a house into flats, but this can be expensive and will involve plenty of budgeting and research to make sure that it is worth your while. Flats can reap a much greater profit than houses, but the costs accrued through extensive building work can far outweigh the benefits.

  • Planning permission

If you have big dreams for your property, for example if you’re converting an old pub or church into flats, you’ll need to apply for planning permission to change its use. If you’ve bought the property for this sole
purpose only to get your planning permission denied, you might be left unsure of what to do next.


Money is of course the integral part of buying properties and renovating them. If you’re careful and productive, you may be able to establish a worthwhile investment, but you’ll need plenty of money behind you in order to succeed.

There are a number of property refurbishment options available to help financially when renovating a property, carrying out a conversion or buying a property to let.

A bridging loan is a popular option and is generally used to bridge a funding gap until a conventional mortgage is available. A bridging loan is often used when the current condition of the asset is unacceptable to mainstream mortgage companies.

The amount that you can borrow varies depending on the lender, and repayment terms can vary too from just one month to 18 months.

Application process

Providing as much information as you can in the initial stages of your application will help to speed up the process and prevent delays.

Your finances will be assessed to ensure that you are suitable for a loan and once this is complete, all information gathered so far is likely to be submitted by the lenders for final approval.

Lending criteria

While there are exceptions, typically, you may have to provide the following to your lender:

  • Bank statements from the last two months
  • Assets and liabilities statement
  • Three years’ audited or certified accounts plus current management figures
  • Employees must present their latest  P60 and three months’ payslips
  • Clean credit history
  • No history of bankruptcy within the last three years. A full explanation is required for bankruptcies from more than three years ago, along with strong evidence of a now satisfactory credit score
  • No evidence of missed mortgage or secured loan payments within the last 36 months. This may be overruled if evidence is presented proving exceptional circumstances

What’s next?

If all goes to plan and your application is successful, then there is still more to be done to control your finances. Most lenders will expect you to put your finances into the project before they will fund you. Lenders will offer a percentage of the total cost of the building work, meaning that the rest will need to be funded yourself. It’s likely that there will be on-going checks to make sure that everything is going to plan.

Renovating a property can be an exciting and rewarding project to sink your teeth into. It allows a lot of creative freedom and no two days are the same. With lots of forward planning and financial support, your dreams can become a reality. At Aldermore, we have a dedicated team of lenders who specialise in
bridging finance for renovation and conversions. If you’re thinking of investing in a property, feel free to contact us for more information.

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