Our client wanted to purchase an investment property requiring extensive refurbishment and an extension. He needed finance arranging quickly so we advised a bridging finance loan as this would ensure a quick turnaround.
There were several reasons why a standard mortgage wouldn’t work. Firstly, it would take too long to arrange. Secondly, the property needed extensive work before it would be considered habitable by a lender. So it was not possible to arrange a standard mortgage.
Ideally, we needed a bridging lender which would also agree to fund the cost of the works on the property. After planning consent had been granted post-completion. The plan was that the client would then sell the property at full market value in order to pay back the bridging loan and realize a profit.
The client was also releasing equity from two existing properties in his portfolio for the deposit, rather than using cash savings. So, we needed a lender who would agree to a second charge over the two properties. This would ensure the client avoided paying exit fees on his current mortgage.
Key requirements: –
- A lender who would lend the full amount required to purchase the property via bridging finance.
- The lender happy to agree to a second charge on two of the client’s existing properties for the purposes of releasing equity for the deposit.
- A lender willing to add the arrangement fee to the loan.
After sourcing the mortgage market, we identified a bridging lender who would agree to lend the full amount required at a competitive rate within the tight timeframe.
The application process
To support the mortgage application, the client provided details of his income and the two properties being used as security for the deposit, along with evidence of his identity. We were delighted to inform him that a bridging lender had issued a formal offer for the full amount requested and could do so within the required timeframe.
- Total property value: £2.4m
- Net loan: £980,000
- LTV: 75%
- Monthly interest rate: 0.75% rolled-up interest
- Loan duration: 1 year
- Lender product fee: £20,000 added to the loan
Monthly payment: £0 (£1,094,060 due at the end of the term, including interest of £94,060)