Heavy Refurbishment Bridging Loans: structural works, conversions, extensions
Once a project goes past cosmetic into structural work, extensions or a change of use, the lending changes with it. The money releases in stages and the numbers need more care. Here is how it works and where people get caught out.
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Heavy refurbishment finance funds projects that go beyond cosmetic work: structural alterations, extensions, loft and basement conversions, changes of use, and conversions of a single building into multiple units. It sits between light refurbishment bridging and ground-up development finance, and it is the product most often chosen wrongly, because the boundaries on either side of it are drawn differently by every lender.
Of the 67 short-term lenders we track (our wider panel runs to over 120 lenders across all product types), 46 offer heavy refurbishment against 56 offering light. Ten lenders will fund a new kitchen and will not fund a loft conversion, which is worth knowing before you spend three weeks with the wrong one.
This page covers what qualifies, what it costs, and the mechanics that make heavy refurbishment different: planning requirements, staged drawdowns, monitoring surveyors, and what happens when the build goes over budget. The boundary between light and heavy is covered in full on our refurbishment bridging page.
What counts as heavy refurbishment
There is no industry definition, so the useful answer is what lenders actually apply.
Work requiring planning permission. One lender draws the line exactly here. Anything under permitted development or needing only building regulation sign-off is light, and anything requiring planning permission is heavy. Clean, binary, and the easiest test to apply yourself.
Structural work. Removing or altering load-bearing elements, underpinning, roof structure alterations, substantial repairs to the building's frame.
Extensions and additional floor area. One lender permits structural works including loft and single-storey extensions where floor area increases by up to 33%, and publishes no other test.
Changes to the number of units. Converting a house into flats, a building into a multi-unit block, or creating a large HMO. Several lenders treat small HMO conversion as light, with one specifying up to six tenants, and anything larger as heavy.
Change of use. Commercial to residential, including permitted development conversions. Lenders will often take these but with conditions. One accepts commercial to residential subject to planning, excludes warehouses and large office blocks, and requires the property to be in a residential area.
Works above a percentage of value. Where lenders use a monetary test, heavy typically begins above 25% to 40% of open market value. One lender funds heavy refurbishment with build costs up to 100% of open market value, which is the most generous published position we have found.
Works above a cash cap. One lender caps light refurbishment works at £250,000 and heavy at £750,000, with anything above £500,000 bespoke priced.
The upper boundary: where heavy refurbishment becomes development finance
This matters as much as the lower boundary, and people pay far less attention to it.
If you are demolishing the building and rebuilding, that is ground-up development. A different product, with lower leverage against cost, more intensive monitoring and different pricing. One lender's published test is whether at least one existing wall is retained. Keep a wall and it is refurbishment. Knock everything down and it is development.
Other lenders look at whether the structure remains fundamentally the same building, or whether a structural warranty will be required. If your scheme is close to this line, establish which product you are applying for before the valuation is instructed, because the valuation instruction itself differs.
"Ten lenders on my list will fund a new kitchen and will not fund a loft conversion. That is the whole job on a heavy refurb: knowing which forty-six to go to, and which of them calls your scheme heavy in the first place."
What heavy refurbishment costs
Rates. Heavy refurbishment typically prices 0.10% to 0.20% a month above light. Published examples across our index include one lender at 0.70% light against 0.85% heavy, another at 0.89% light, 0.98% medium and 0.99% heavy, and a third at 0.79% to 0.89% on heavy tiers against 0.69% to 0.79% on light. Broadly, expect 0.85% to 1.10% a month on heavy refurbishment against standard residential security, and higher on commercial.
Leverage is where it really differs. Expect a lower day one advance and a lower maximum against end value:
- One lender offers 75% on light refurbishment and drops heavy to 70% of current market value
- Another holds 80% net on both headline products but reduces the maximum loan to gross development value from 75% on light to 70% on heavy with drawdowns
- A third works to 70% net of purchase price or value plus 100% of costs, with a 70% maximum loan to gross development value
Term is longer, which is a benefit rather than a cost. One lender runs light at 6 to 12 months and heavy at 9 to 18. Terms of 12 to 24 months are normal on heavy refurbishment, and they should be, because these projects overrun.
Fees. Arrangement fees of 2% are standard. Add the monitoring surveyor costs below, which are specific to staged lending, and in some cases a structural warranty. Our rates page sets out every other charge.
Does planning need to be in place before you draw down?
This is one of the most important questions on a heavy refurbishment, and the answer varies sharply.
Some lenders require planning on day one, in terms. One lender's published criteria state plainly that planning must be in place day one on heavy refurbishment. They will not fund a scheme waiting on a decision, and no amount of confidence about the outcome changes that.
Others require it to be evidenced where applicable. Another lender requires that planning, building regulations and warranty must be evidenced if applicable, together with a detailed schedule of works and builder contracts where appropriate.
A minority will lend before planning, pricing the risk, usually at materially lower leverage, and generally only where the scheme would still work without the consent.
Building regulations are treated differently. Planning is usually a condition precedent, meaning it has to exist before completion or first drawdown. Building regulations are typically a condition during the works, with lenders accepting interim certificates during the build and requiring final sign-off before redemption. One lender requires building regulations sign-off or an interim certificate along with the full schedule of works, contractor details and an acceptable structural warranty.
The practical sequence. If your scheme needs planning, get it before you approach a lender. If you are buying at auction with planning not yet granted, understand that you are narrowing your lender list to a handful and that your exit assumes a decision nobody has made yet. That is speculation rather than a funded project, and it should be priced as such.
And permitted development schemes still usually need a prior approval or a lawful development certificate, and lenders will want to see it. "It's permitted development" is not evidence.
An empty shop with a flat above it, semi-commercial and vacant on both floors, converted into four flats.
Read the full case study →Day one advance and works money are two separate numbers
This is the single most misunderstood mechanic in refurbishment lending, and getting it wrong is what causes projects to stall halfway.
The day one advance is a percentage of the purchase price, or of current value on a refinance, and it completes the purchase. Typically 70% to 75%, and with most lenders that is a gross figure, so the arrangement fee and the retained or rolled interest come out of it before anything reaches your solicitor.
The works facility is a separate allocation, often up to 100% of the build cost, released in stages after the work is done.
They interact in three ways, and each one can be the binding constraint.
- Against the end value. The total of the day one advance plus the full works facility plus, with some lenders, the interest and fees, has to sit within a maximum loan to gross development value. That is commonly 70% to 75%. A scheme with a modest uplift hits this ceiling before anything else
- Against total cost. Some lenders apply a loan to cost test as well, meaning the total facility cannot exceed a percentage of purchase price plus works plus fees. Where both tests apply, the lower one governs
- Against current value. The works facility itself is frequently capped as a percentage of day one value, ranging across lenders from 20% to 100%
A worked example
Purchase £250,000. Works £120,000. Expected end value £500,000.
| Day one advance at 70% of £250,000 | £175,000 |
| Works facility, 100% of £120,000 | £120,000 |
| Total facility | £295,000 |
| As a percentage of the £500,000 end value | 59% |
That clears a 70% loan to gross development value test comfortably, so the binding constraint here is the day one advance, not the end value. Your cash requirement is £75,000 of deposit, plus stamp duty, plus fees, plus working capital for the first stage of works.
Now change the end value to £400,000. The same £295,000 facility is 74% of it, which fails a 70% test. The lender reduces the facility, and the reduction comes out of your pocket.
So the end value is not a nice-to-have on heavy refurbishment, it is a constraint. Get it properly evidenced from comparables or an agent's appraisal before you commit, not from a yield calculation on assumed rents.
The monitoring surveyor
On any heavy refurbishment with staged drawdowns, expect a monitoring surveyor. They act for the lender, not for you, and you pay for them.
What they do. An initial report before the first drawdown, assessing the schedule of works, the costings, the contractor and the programme. Then an interim inspection before each subsequent drawdown, confirming the work claimed has been done to the value claimed.
What it costs. One lender publishes a fixed fee scale for works up to £500,000: an initial report at £415 plus VAT and each interim report at £258 plus VAT. That is one of very few published scales in the market and it is a reasonable benchmark. Most lenders quote case by case against the size and complexity of the scheme, give an indicative figure up front, and have the borrower pay the surveyor directly.
On a scheme with four drawdowns, budget roughly £1,500 to £2,500 including VAT for monitoring on a modest project, and more on anything large or complex.
How much it slows you. Each cycle runs: you complete a stage and submit the claim, the surveyor is instructed, the inspection is booked around their availability, the report is issued, the lender releases funds. Two to three weeks per cycle is realistic. Not days.
How to reduce the drag. Fewer, larger drawdowns. Most lenders set a minimum drawdown amount, commonly £25,000, or at one lender £20,000 or 20% of build cost, whichever is greater. Several cap the number of releases: one allows a maximum of five drawdowns, another four, and another three on its larger product. Working to three or four well-sized stages rather than eight small ones saves both fees and weeks.
And book inspections before you need them. Surveyor availability, not the lender's decision, is usually what delays a drawdown.
Works money is released in arrears, and that changes your cash planning
You pay for each stage first. The surveyor inspects. The lender reimburses.
So a £120,000 works budget does not require £120,000 on day one, but it does require enough working capital to fund a full stage and to carry it through the reimbursement cycle. On four drawdowns of £30,000, with two to three weeks per cycle, you need £30,000 of working capital available continuously, not once.
Some lenders will release against certified work done rather than invoices paid, which eases this considerably. Others will release against materials on site. Both are worth asking about specifically, because they change the working capital requirement materially and they are rarely volunteered.
This is the most common reason heavy refurbishment projects stall, and it has nothing to do with the building. The works are fine. The money is in the facility. The borrower simply cannot fund the next stage while waiting to be paid for the last one.
When the works cost more than the quote
They frequently do. Here is who pays.
In the first instance, you do. The facility is sized against the schedule of works submitted at the outset. An overrun is outside that, and the lender has no obligation to fund it.
The lender may increase the facility, but it is a new credit decision. It will be considered only if the maximum loan to gross development value still works after the increase, and if the end value supports it. If you were at 68% against a 70% cap, there may be headroom. If you were at 70%, there is none, and the answer is no regardless of how reasonable the overrun is.
Variations need consent. If the overrun comes from a change to the scheme rather than a cost increase on the same scheme, most facility agreements require the lender's agreement to the variation. Doing the work first and asking afterwards is a breach, and it also means the monitoring surveyor may refuse to certify work that is not in the approved schedule.
The realistic options when you are over budget:
- Fund it from your own resources
- Value engineer the remaining works down, which usually means reducing specification rather than scope
- Ask for a facility increase, which depends entirely on the headroom against end value
- Bring in a second charge, which is expensive and requires the first charge lender's consent
- Extend the term and sell rather than refinance, if the sale still clears the debt
How to avoid being there in the first place:
Fixed price contracts where you can get them, with a specified scope and a clear variations procedure.
15% to 20% contingency on top of the quoted cost, and include it in the facility request rather than holding it in your head. A lender that has sized the facility including contingency has headroom. A lender that sized it without has none.
Open up early. The second defect in a property with one known defect is extremely common. Where the scheme allows, strip out and investigate before the budget is finalised rather than after.
Be honest about the schedule of works at application. A schedule written optimistically to improve the loan to cost ratio produces a facility too small to finish the job, which is a problem you have created for yourself in month four.
What a lender wants to see on a heavy refurbishment
Beyond the standard bridging requirements:
- A detailed schedule of works, itemised by trade and stage, not a single figure
- Costings, ideally a fixed price contract
- Contractor details, including experience, insurance and sometimes references or accounts
- Planning permission, in place on day one with many lenders
- Building regulations approval, or a plan for obtaining it, with interim certificates during the build
- A structural warranty where the scheme requires one, with the provider needing to be acceptable to the lender
- Your experience. Many lenders tier the maximum advance by track record, with the top tier kept for borrowers who can evidence two or more completed schemes of similar type. On heavy refurbishment this gate is applied more strictly than on light, and the difference between tiers is several percentage points of leverage
- An evidenced end value, from comparables or an agent's appraisal
- A programme, with realistic dates
Timescales
| Stage | Realistic |
|---|---|
| Enquiry to terms | Hours to days |
| Terms to completion | 3 to 6 weeks |
| Completion to works starting | 2 to 4 weeks |
| The works | 4 to 9 months |
| Each drawdown cycle | 2 to 3 weeks |
| Building regs sign-off and snagging | 2 to 6 weeks |
| Exit valuation and refinance | 6 to 10 weeks |
| Total | 9 to 18 months |
Take the longer term. Heavy refurbishment is where facility terms most often prove too short. Most lenders have no early repayment charge and rebate unused interest, often daily after a minimum period of one to three months, so an eighteen month facility redeemed at month twelve usually costs around twelve months of interest. An extension at 1% of the balance plus a fresh assessment costs considerably more, and it arrives at the worst possible moment.
Funding Complex Structural Refurbishments with Bridging Finance Broker
How much can I borrow on a heavy refurbishment?
Typically 70% to 75% of the purchase price on day one, plus up to 100% of the works costs released in stages, with the total capped at 70% to 75% of the end value. Whichever of those three tests produces the lowest number is the one that applies.
Do I need planning permission before I apply?
With many lenders, yes, and some state it as an absolute requirement before day one. A small number will lend before planning at lower leverage. If your scheme needs consent, getting it first widens your options and improves your pricing substantially.
Will I definitely need a monitoring surveyor?
On staged drawdowns, almost always. One published scale charges £415 plus VAT for the initial report and £258 plus VAT per interim inspection, with the borrower paying. Some lenders decide case by case and confirm it in the decision in principle.
How many drawdowns will I get?
Commonly three to five, with a minimum of around £20,000 to £25,000 per drawdown. Fewer, larger drawdowns cost less in fees and save weeks.
Can I do the work myself?
Some lenders permit it where you are a competent professional, many do not, and nearly all prefer a contracted builder with insurance. It affects both the facility and the monitoring requirement, so raise it at the outset rather than later.
What if I have no previous experience?
Heavy refurbishment is the product where experience matters most. First-time borrowers are accepted by a number of lenders but usually at a reduced maximum advance, sometimes several percentage points below the headline. Expect to put in more cash.
What happens if the project overruns the term?
Extensions are available, typically from 1% of the balance with a fresh assessment, and an unauthorised extension costs more. Building a longer term in at the outset is almost always cheaper.
Can I switch from light to heavy refurbishment mid project?
Not usually within the same facility. A change of scheme generally requires the lender's consent to a variation and may need a new product entirely. Doing the work first and asking afterwards is a breach of most facility agreements, and the monitoring surveyor will not certify work outside the approved schedule.
What is the difference between heavy refurbishment and development finance?
Broadly, whether the existing building is retained. One lender's test is that at least one existing wall must remain for the scheme to qualify as refurbishment. Development finance funds the build in stages against cost, prices differently, and monitors more intensively.
What counts as heavy refurbishment?
Structural work, extensions, loft and basement conversions, changes of use, creating additional units, and anything needing planning permission. Where lenders use a monetary test it typically begins above 25% to 40% of open market value. There is no industry definition, so it varies.
Can I convert a commercial building to residential?
Often yes, subject to planning or a prior approval. Lenders apply conditions: one accepts commercial to residential but excludes warehouses and large office blocks and wants the property in a residential area. Establish the specific lender's position before you commit.
Why did the lender reduce my facility after the valuation?
Usually because the end value came in below your figure and the total facility no longer fits inside the maximum loan to gross development value. The reduction comes out of your own cash, which is why the end value needs evidencing from comparables before you commit rather than after.
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