How a BRR deal makes money
Buy, refurbish, refinance works by adding value. You buy a property that needs work, usually with bridging finance because mainstream lenders won't lend on it in its current state, carry out the refurbishment, then refinance onto a buy-to-let mortgage based on the new, higher value. The new mortgage repays the bridge, and ideally returns most of the cash you put in.
The number that matters most is the cash left in the deal after the refinance. The less money left in, the higher your return on it and the sooner you can recycle the cash into the next purchase. A deal can show a healthy uplift and still leave a lot of cash tied up once stamp duty, bridging costs and refinance fees are counted.
Bridging costs are where BRR numbers go wrong
Bridging interest is usually charged monthly and either paid as you go (serviced) or retained and repaid when the bridge is cleared. The calculator handles both: serviced interest is added to the cash you need during the project, while retained interest is added to the balance the refinance has to clear. Arrangement fees, any early repayment charge and the refinance's own broker, valuation and legal fees are all included.
Refurbishments rarely finish early, and every extra month adds interest and holding costs. Try the deal with a longer refurb period to see how much margin you have before the refinance stops clearing the bridge.
The refinance and the six-month question
The refinance is based on the lender's valuation, not your estimate, and the loan is a percentage of that value: commonly up to 75% for buy-to-let. Many mainstream lenders also want you to have owned the property for around six months before they'll lend on the new value, while some specialist lenders will refinance sooner. The calculator lets you set the refinance month so bridging interest runs for the right length of time.
The new mortgage has to pass the lender's stress test too. The calculator checks whether the rent covers interest on the new loan at a stressed 5.5% by 125% or 145%, depending on your tax position: a deal that refinances well on value but fails on rent will limit how much you can borrow.
Three possible outcomes
Money left in: the refinance repays the bridge and returns some of your cash, but part stays tied up. Everything recycled: the refinance returns all the cash you put in, and sometimes more. Shortfall: the new mortgage isn't enough to clear the bridge, so you'd need to find extra cash at refinance. The calculator tells you which one your deal lands in and by how much.