Investment Bridging Loan
We were approached by a client looking to buy an investment property which he hoped to tenant out, making money from its rental – a common occurrence. The reason for a short-term loan was that the client had to move quickly to secure the property at its current price, believed to be at discount.
Where this became a little unusual was that:
• The property was selling for £1.15m (advised value £1.3m)
• The client only held one other investment property which he had “taken over” from his brother earlier in the year.
• The client lived at home with parents on a demonstrable income of only £26,000 pa.
With the property being down the road, lenders were rightly concerned that the client was looking to actually buy a property to live in, that he patently couldn’t afford and borrow at a level impossible on his income if he was to apply for a residential mortgage.
However, over time we were able to show that the client had another reasonably high value property, in fact the deposit had come from refinancing the other buy to let. That his plans for tenanting the new property made sense, and most importantly, we were able to show the client could refinance out of the bridge with a buy to let in due course.
By addressing the lenders concerns at an early stage the primary reason to reject was worked around and this high value loan in comparison to the clients net worth was able to complete.
9 month facility with interest retained over the term.
£841,087.50 gross loan @ 0.7% pcm
1.95% arrangement fee and no exit fee.
The decision not to charge the client was taken as the lender was paying a procuration fee of 2.2% – unusually, a fee higher than the arrangement fee so over £18k was paid out with the potential for further income if the client took out the buy to let refinance.