Buy-to-refurb and refurb-to-let mortgages

A buy-to-refurb mortgage is finance for a landlord buying a property that needs work before it can be let. It usually has two stages: short-term finance to buy and refurbish the property, then a buy-to-let mortgage once the works are done. Some lenders offer both stages as one product, switching from the first to the second at the end.

The approach suits properties that a buy-to-let lender would not accept as they stand, such as homes without a working kitchen or bathroom, or homes that need rewiring and modernising before they meet letting standards.

It is also used to add value, for example by adding a bedroom or converting a house into flats, though larger conversions can move into heavy refurbishment.

In the first stage, the lender funds part of the purchase price and sometimes part of the works, and interest is often rolled up or retained. Once the works are complete, a valuer values the property again and the borrower refinances onto a buy-to-let mortgage based on the new value and the expected rent.

Lenders that offer both stages in one product agree the terms for the refinance at the start, which reduces the risk of the exit falling through. Where the stages are with different lenders, the borrower needs a buy-to-let lender that will refinance soon after the purchase, because some prefer to wait.

The buy-to-let mortgage is tested on rent, so the expected rent after the works matters as much as the value.

Lenders check the purchase price, the works budget, the value once the works are done, the expected rent and the landlord's experience. A schedule of works with quotes and a realistic programme helps, and lenders want to see that the property will meet letting and safety standards once finished, including gas, electrical and energy efficiency rules.

New landlords can find lenders, though the choice is narrower and a larger deposit is often needed. Portfolio landlords are also assessed on their wider holdings.

How lenders tell light and heavy works apart, and how that affects the loan, is set out on the light vs heavy refurbishment page.

Some landlords refurbish a house to let as a house in multiple occupation or convert it into flats. These projects usually need planning permission or a licence, and they bring extra fire safety and building regulations work. Lenders treat them as heavier projects and look closely at the planning position before lending.

The refinance at the end is onto an HMO or multi-unit buy-to-let mortgage rather than a standard one, so the exit lender needs to be lined up early.

Licensing rules for HMOs vary by council, and some areas need a licence for smaller shared homes too.

Comparing buy-to-refurb finance means looking at both stages together: the short-term rate and fees, how the works money is released, any exit fee, and the rate and fees on the buy-to-let mortgage at the end. A single product that covers both stages can cost more upfront but reduces the risk of a failed refinance.

A broker who arranges refurbishment and buy-to-let cases can compare lenders on both stages. Pricing across refurbishment lending is explained on the refurbishment finance rates page.