The Value of Proactive Advice: Securing a £300,000 Build Facility for an HMO Conversion

Our client purchased a property earlier this year through another broker, but had not been advised that build costs could be funded as part of a refurbishment facility. This case study highlights the importance of proactive advice and how we secured a £300,000 build facility to enable the conversion of a 6-bed HMO into a high-spec 8-bedroom HMO.

The Challenge

The client had already purchased the property and was working with an existing lender. However, they needed a £300,000 build facility to carry out the conversion from a 6-bed HMO to an 8-bed HMO — and their current lender could not support it.

The core issue was that the client had not been advised at the time of purchase that refurbishment finance could be structured alongside the acquisition. This left them in a position where they owned the property but lacked the capital to deliver the planned works.

What the Client Needed

• A lender willing to provide a £300,000 build facility for the HMO conversion
• A smooth transition from their existing lender to a new one
• A finance structure that supported both the asset and the longer-term strategy

Our Approach

1. Project review — We reviewed the property, the planned works, and the client's overall strategy to understand the full picture before approaching lenders.
2. Lender identification — We identified a lender able to provide the full £300,000 build facility, ensuring the client had the capital required to deliver the scheme properly.
3. Loan transfer — We managed the process of moving the loan from the existing lender to the new one, coordinating with all parties to minimise disruption.
4. Ongoing support — We ensured the new finance structure supported the client's strategy for converting the property into a high-spec 8-bed HMO.

Key Considerations

This case study is a reminder of several important points for property investors:

• Ask about refurbishment funding early — If you are purchasing a property with plans to refurbish or convert it, make sure your broker explores whether build costs can be funded as part of the deal from the outset.
• Not all lenders offer build facilities — Some lenders focus only on the purchase element. A specialist broker can identify lenders who offer both purchase and refurbishment funding.
• Switching lenders mid-project — While not ideal, it is possible to move to a new lender if your current one cannot support your plans. There may be costs involved, so this should be weighed carefully.
• HMO conversions require careful planning — Converting a 6-bed to an 8-bed involves planning, licensing, and building regulations considerations. Having the right finance in place is only one part of the puzzle.

Outcome

We moved the loan to a lender able to provide the full £300,000 build facility, giving the client the capital required to deliver the scheme properly. The client could then proceed with converting the 6-bed HMO into a high-spec 8-bedroom HMO.

Frequently Asked Questions

What is a build facility?

A build facility is a loan specifically designed to cover refurbishment or construction costs. Funds are typically released in stages as works progress, verified by a monitoring surveyor.

Can I add a build facility after I have already purchased a property?

Yes, but it may require moving to a new lender if your current one does not offer refurbishment funding. A broker can help identify lenders who offer this type of facility.

Why did the original broker not advise on refurbishment funding?

Not all brokers specialise in HMO finance or refurbishment lending. Working with a specialist broker who understands the full range of funding options can help avoid situations like this.

What is the difference between a 6-bed and an 8-bed HMO in terms of licensing?

Licensing requirements vary by local authority. In many areas, all HMOs require a licence, but larger HMOs (typically 5+ occupants forming 2+ households) require a mandatory licence. Converting from 6 to 8 beds may trigger additional requirements.

How are build costs released?

Lenders typically release build funds in stages, often referred to as tranches. A monitoring surveyor visits the property at each stage to confirm the works have been completed to the required standard before the next release.

Is it expensive to switch lenders?

There may be costs such as early repayment charges, legal fees, and valuation fees. However, if the new lender can provide the funding you need to complete your project, the overall benefit often outweighs these costs.

Next Steps

If you need funding that supports both the asset and the strategy — whether that is a build facility, a refinance, or a new acquisition — get in touch with us. You can also explore our HMO finance and refurbishment finance pages for more information.