Ground-up development and refurbishment are different undertakings â financially, operationally, and from a lender’s perspective. The finance products are similar in structure but differ in risk profile, cost, and the metrics lenders apply. Understanding where each fits helps developers choose the right product and the right lender.
The Core Difference
Ground-up: building from cleared land or a site with demolished structures. There is no existing building providing immediate security. The lender advances against site value and projected GDV with nothing physical standing until the build is complete.
Refurbishment: working on an existing structure â whether cosmetic upgrade, structural alteration, or full conversion. An existing building provides collateral from day one. The risk profile is lower than ground-up because partial security exists throughout.
How Risk Differs
Ground-up development carries more construction risk â a new build can be affected by ground conditions, structural issues encountered during demolition and excavation, and build cost overruns. Refurbishment typically has better cost predictability (the structure exists and has been surveyed), though heavy refurbishment and conversion can encounter unexpected issues â particularly in older buildings.
Lenders reflect this in pricing: ground-up rates are typically higher than heavy refurbishment rates for equivalent LTC ratios.
Finance Product Differences
Ground-up finance:
– Higher rates (0.85â1.5% per month) [VERIFY]
– More conservative LTC caps (typically 70â75% senior)
– Longer terms (12â24 months or more)
– Monitoring surveyor required from day one
– Planning permission required before drawdown
Refurbishment finance:
– Lower rates for light refurbishment (closer to bridging, 0.65â1.0% per month) [VERIFY]
– Heavy refurbishment rates similar to ground-up but often at the lower end
– Higher LTV available because the existing building provides more immediate security
– Monitoring surveyor required for heavy refurbishment; not always for light
– Planning required only if the work requires it
The Light/Heavy Distinction Matters for Lender Choice
Light refurbishment (cosmetic, non-structural) is typically funded as a standard bridging loan. Most bridging lenders will advance to 70â75% LTV against the current value, with no drawdown facility needed â the borrower funds the works from equity and draws the whole loan at the outset.
Heavy refurbishment and conversion need a staged drawdown facility, monitoring surveyor, and a more structured credit assessment â closer to development finance. The lenders for each segment overlap but are not identical. Specialist development finance lenders are more relevant for heavy refurbishment; bridging lenders cover the lighter end.
Which Route to Choose
Choose ground-up finance if:
– The project involves new construction on cleared or greenfield land
– Planning permission has been obtained for new units
– The developer has prior experience of ground-up schemes
Choose refurbishment finance if:
– An existing structure is being improved, extended, or converted
– The works fall short of full demolition and new build
– For light works: bridging finance is often the simpler and cheaper route
– For conversion: check whether the lender understands permitted development or full planning routes
Marginal cases: brownfield sites with partially demolished structures, barn conversions, listed building works, and complex mixed-use conversions may be assessed differently by different lenders. Using a broker with specific knowledge of the lender’s appetite for the asset type is important in these cases. [EDITORIAL JUDGEMENT]
Related Pages
- Ground-Up Development Finance
- Refurbishment Finance
- Development Finance Costs Explained
- Best Development Finance Lenders UK