Things have been moving apace in the housing market with buyers competing for limited stock. Our client, a professional who recently went self-employed. Also found himself needing to move quickly exchanging on his purchase within two weeks. And also completing just two weeks after that. Bridging Finance to his new home looked to be the only option that would enable him to get the transaction over the line with such a tight timescale.
There were several reasons why a standard mortgage just wouldn’t work in this scenario. Firstly, it would take too long to arrange. Secondly, because the client became self-employed last year. He didn’t have much in the way of proof of income although there is a portfolio of rental income which has been in place for many years. While he could prove that he could afford the mortgage, it would take time for a standard lender to wade through all the paperwork. To make the numbers add up, the client also needed a 75 per cent loan-to-value buy-to-let mortgage on an existing property.
Due to the client being a professional. We looked for a lender who would allow one year’s figures for his self-employed business. As well as taking the rental income into account. The time restraints meant that bridging finance was required, as this can be arranged quickly. Moreover, bridging rates are extremely low, making this cost-effective, as well as a fast option.
Numerous lenders were sourced but we needed one who offered competitive bridging finance and would lend to a self-employed professional with just one year’s accounts.
Key requirements: –
• A lender who would lend the full £800,000 required to purchase the new property via bridging finance. • A lender prepared to lend to a recently self-employed professional with just one year’s accounts. • A lender happy to consider a portfolio of rental income when considering affordability. • 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, taking charges on two separate properties, within the tight timeframe.
The application process: To support the mortgage application. The client provided details of his income from self-employment and his rental portfolio, 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 value of two properties borrowed against: £1.3m • Loan amount: £800,000 • LTV: 60% • Bridging rate: 6.96% per annum rolled-up interest • Loan duration: 1 year • Lender product fee: £20,000, added to the loan • Monthly payment: £0 (£800,000 due at the end of the term, plus interest of £55,680)