Refurbishment Loan Costs in 2026: Rate, Fees and the True Cost of the Money

The redemption statement arrives by email on a Friday, two pages long, and the investor reads it three times before accepting it. The facility was £352,500 against a three storey terrace in Gillingham. The rate quoted twelve months earlier was 1.05 percent a month, which anyone would translate as 12.6 percent a year. The statement says the whole exercise cost £52,609, which is 14.9 percent of what was borrowed. Nothing on the statement is wrong and nothing was hidden. The gap is simply everything that is not the rate: an arrangement fee, an exit fee, two sets of solicitors, a valuation reporting two figures, and a monitoring surveyor who came to site four times. Each line was disclosed. None of them appeared in the comparison that chose the lender.

Refurbishment Loan, a trading name of Lenzie Consulting Ltd (company number 08174104), is a UK finance arranger and introducer and not a lender. Bridging and refurbishment finance secured on investment property is unregulated lending that sits outside the Financial Conduct Authority’s regulated mortgage perimeter, and the business holds no FCA authorisation because the products it arranges are unregulated. It does not arrange regulated bridging, residential mortgages, or any loan secured on a property the borrower or an immediate family member lives in or intends to live in; those enquiries are referred to a regulated firm. Every figure below is an indicative range, confirmed only in a formal offer, never on a website.

In the episode below, Georgina takes a redemption statement apart line by line and explains which of those lines are negotiable.

The rate is roughly two thirds of the bill

Monthly pricing across our lender panel sits at 0.75 to 0.99 percent for light refurbishment work and 0.85 to 1.15 percent for heavy, with the arrangement fee running at 1.5 to 2 percent of the facility. Those two numbers are what borrowers compare. They are not what borrowers pay.

Interest is the largest single line on almost every facility, but on a twelve month project it typically accounts for somewhere around two thirds of the total cost of the money. The remaining third is spread across five or six smaller lines, each too small to argue about on its own and collectively worth more than the difference between one lender’s rate and another’s. That is why a quote at 0.89 percent a month can be more expensive than a quote at 0.99 percent, and why comparing headline rates is close to useless as a way of choosing a facility.

Interest was two thirds of that bill. The other third arrived in lines nobody looks at when they are comparing rates.

Interest: retained, rolled or serviced

How interest is paid changes the bill as much as the rate itself, and refurbishment projects have a specific problem here: the property produces no income during the works, so servicing a monthly payment from the project is impossible by definition.

Retained. The lender deducts the full term’s interest from the facility at completion. There is no monthly payment, which is the attraction, but the deduction comes out of the money available. On the Gillingham facility, £34,965 of retained interest inside a £352,500 gross facility left £317,535 of usable funds, so the borrower covered that gap from their own cash at day one. Retention is not free money, it is borrowing the interest and losing the leverage.

Rolled. Interest accrues and compounds onto the balance, settled at redemption. The cashflow effect is similar to retention, but the arithmetic differs. On the day one advance of £232,500 at 1.05 percent a month, simple retained interest over twelve months is £29,295, while compounding monthly produces £31,036. That £1,741 difference exists purely in the mechanics.

Serviced. You pay monthly out of other income. It is the cheapest option in total cost and the least used on refurbishment work, because most investors would rather have their cash in the building than in a standing order.

One clause is worth more than any of this. On a staged facility, interest should accrue only on drawn funds. A lender charging on the full committed amount from day one is materially more expensive at an identical headline rate, and on the worked example below that single point was worth about £9,500.

The fee schedule

Line	Indicative range	What drives it
Arrangement fee	1.5 to 2 percent of facility	facility size, leverage, complexity
Exit fee	0 to 1 percent	lender choice, often avoidable on light work
Valuation	£300 to £2,500 and upwards	heavy cases pay for two figures
Monitoring or QS	£250 to £750 per visit	one visit per staged drawdown
Legals, both sides	£750 to £2,000 and upwards each	title complexity, staged security
Transfer and admin	£25 to £50	per drawdown, small but present

Three of those lines are genuinely negotiable and three are not. The arrangement fee moves with competition for the case. The exit fee can often be removed entirely on light work by placing the loan with a desk that does not charge one. The broker fee is quoted up front or it should not be accepted. Valuation, monitoring and legal costs are third party charges set by third parties, and a lender who offers to discount them is usually recovering the difference elsewhere.

Twelve months on a Gillingham terrace

The property was bought at £310,000 with a heavy schedule of works at £120,000: structural openings on the ground floor, a loft conversion, full rewire and two new bathrooms. Gross development value £560,000, so the whole facility of £352,500 sat comfortably inside the 75 percent loan to gross development value ceiling of £420,000. Rate 1.05 percent a month, term twelve months.

Interest ran on drawn funds. The day one advance of £232,500 cost £2,441 a month, which is £29,295 across the year. The works came as four staged tranches of £30,000, released at months three, six, nine and twelve against a surveyor’s certificate, and those tranches carried £5,670 of interest between them because each one was drawn for less of the term than the one before. Interest total: £34,965.

Then the rest. Arrangement fee at 1.75 percent of £352,500 is £6,169. Exit fee at 1 percent is £3,525. Valuation reporting both current value and gross development value, £1,850. Lender’s solicitors £1,600 and the borrower’s £1,400, so £3,000 of legals. Monitoring: a £950 initial appraisal plus four site visits at £500 each, £2,950. Transfer charges across five drawdowns, £150.

Total cost of the money: £52,609 on £352,500 borrowed over twelve months. Interest was 66 percent of it. The other 34 percent was the part nobody compared.

The lines that appear later

Minimum interest periods. One to three months of interest is usually payable even on a facility redeemed in week two. It matters whenever a quick sale is plausible.

Extension fees. Typically around 1 percent plus a rate step if the project outruns the term. The cheap prevention is a longer term on day one, since retained interest on unused months is often refunded and an extension fee never is.

Two sets of exit costs. A sale exit pays agency and conveyancing. A refinance exit pays a fresh valuation and another set of legals. Neither of those sits on the bridging quote, and both are real money at the end of the project.

Contingency. Not a lender charge, but the absence of a ten to fifteen percent buffer in the schedule of works is the most reliable predictor of a project going wrong, and underwriters read for it.

Comparing two quotes honestly

The only comparison worth making is total cost of funds over the term you will realistically need, on your actual drawdown profile, with every fee line included. That means asking four questions of any quote: does interest accrue on drawn funds or committed funds, is there an exit fee, what is the minimum interest period, and what does the monitoring schedule cost across the number of drawdowns you expect. A quote that answers those four well at 0.99 percent regularly beats a quote that answers them badly at 0.89 percent. This arithmetic is set out line by line in every cost line on a refurbishment loan, and it is the calculation we run on every case before recommending one.

The 2026 outlook

The Bank of England base rate was 3.75 percent after the July 2026 decision, and monthly refurbishment pricing has been stable rather than falling, because short-dated bridging rates respond far more to security quality, leverage and track record than to the base rate. What moved in 2026 was the fee side. Competition among short-term desks has pushed exit fees off a growing share of light facilities, while monitoring costs on heavy projects have risen with surveyor availability. The net effect is that the spread between a well placed facility and a poorly placed one has widened even where the headline rates look identical, which makes the comparison work more valuable than it was two years ago.

FAQ

What is the total cost of a refurbishment loan as a percentage? It depends on the term and the classification, but a useful rule from the worked example above is to add two to three percentage points to the annualised headline rate. A 1.05 percent monthly rate reads as 12.6 percent a year and delivered a real cost of 14.9 percent over twelve months once every fee was counted. Shorter facilities look worse on that measure because the fixed fees are spread over fewer months.

Is the arrangement fee paid up front or added to the loan? Usually added, which means you pay interest on it for the life of the facility. On a £352,500 facility a 1.75 percent fee of £6,169 added at completion costs roughly another £777 in interest over twelve months at 1.05 percent a month. Paying it in cash avoids that, at the price of more cash at day one.

Can I avoid the exit fee on a refurbishment bridge? Often, on light work. A meaningful part of the short-term market does not charge one, so the fee is frequently a placement decision rather than a market rate. On heavy facilities with staged drawdowns it is more common and harder to remove, and it is worth pricing against the rate rather than treating it as non-negotiable.

Why does a refurbishment valuation cost more than a mortgage valuation? Because the report carries two opinions of value rather than one: what the property is worth in its current condition, which sizes the day one advance, and what it should be worth on completion, which sizes the whole facility on heavy work. On unusual property a surveyor may also be asked for a view on the finished rental or sale evidence, which adds again.

Talk to us

If you have a quote in front of you and want to know what it will actually cost, send it over with your schedule of works and we will run the total over your real term. Start with every cost line on a refurbishment loan, look at the drawdown mechanics behind the monitoring fees in heavy refurbishment finance, then model your own case with the refurbishment loan calculator. See also property refurbishment finance for how investors structure a project end to end.

All figures in this article are indicative ranges for UK refurbishment finance in 2026, confirmed only in a formal offer, and are not an offer, a quote or a financial promotion. Any facility is subject to lender terms, valuation and full underwriting. This article was written by Matt Lenzie.