Everything You Need to Know about Refurbishment Loans
At Onate, we are always looking to expand our product offering. Over the last few years, we have widened our finance offering to include advancing loans against both mixed use and commercial properties. Through interactions with borrowers and introducers who work with properties that require refurbishment works, we know that they require a finance offering that helps fund the refurbishment works in addition to the property purchase loan. This is what we refer to as a refurbishment loan.
What is a refurbishment loan?
When a property investor identifies a property to purchase that requires minor refurbishment, and the works are non-structural in nature, Onate can offer a facility in addition to the loan provided to purchase the asset. The promoter will agree the level of works that need to be to carried out and once Onate are satisfied with the breakdown of works and the costs associated with completing the works, a refurbishment loan will be approved.
How does it work?
The refurbishment loan is quite a straightforward process. If, for example, the borrower has a refurbishment loan of €300k approved, they will instruct their contractors to carry out the works. Once Onate are satisfied that the works are completed, the funds will be released to the promoter to pay the contractor.
The loan can be drawn down in multiple tranches. For example; if €100k of works are completed after a two-month period, the borrower can draw down an initial €100k after those two months and take the remaining funds once the rest of the works are completed.
What are the benefits of refurbishment finance?
1. Equity into the deal
The promoter will now have to put in less of their own cash into the deal. Previously if a borrower was to purchase a property for €1m, Onate would be able to lend up to a maximum of 70% LTV of the value of the property and the borrower would then have to fund the refurbishment works themselves. With our new product, we are now able to offer a facility to fund the works, in addition to the loan to purchase the property. In certain cases, we will be able to offer up to 100% of the cost of the works
2. Multiple drawdowns
Our flexibility allows us to offer multiple drawdowns. This will allow the borrower to only draw down the funds once they are needed. This ensures that the borrower is not incurring any additional costs in the event that the works are delayed and the full amount was drawn down before the works were completed.
3. Focus on multiple projects
This will enable experienced property investors to take on multiple projects, where previously they were restricted to moving from one project to the next as they had too much capital tied up in a single project. This will help bring much needed residential properties onto the market across Ireland more quickly.
With Refurbishment Finance, borrowers can access the funds they need to unlock the full potential of their properties and maximize their returns.
Whether you’re looking to complete a minor refurbishment or a major renovation, Onate can help.
Contact us today to learn more about Refurbishment Finance and how it can help you achieve your goals.
