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Bridging Finance for Residential Purchase Case Study

For this study we are looking at the benefits of bridging finance for a client looking to Purchase a new residential property by using a “Let to Buy” mortgage to raise funds for the deposit.

In this instance, the client was in the process of a standard Let to Buy re-mortgage (a let to buy re-mortgage is when a client wants to retain their existing residential property and let it out, max 75% loan to value) but due to their complex income the underwriters wanted to see more payments from their current contract which had just started.

The client was purchasing their new residential with a mortgage which had already offered and was now in a position where they would not be able to secure the finance, they needed using traditional means in time to meet the stamp duty deadline. This is where we were able to suggest regulated bridging finance to raise the deposit funds and be able to facilitate the purchase.

Contact us today to discuss Bridging Loans and how we can assist you.

With bridging finance there are a few important factors that need to be considered;

  • You must always have an exit for your client before taking out the bridge – the lender will need to know what this and will require proof if the exit is a refinance by way of a decision in principle.
  • Bridging finance is more expensive than a standard mortgage and should only ever be recommend as a short-term solution.
  • The financing options are either for Serviced or Retained. “Serviced” is where a client makes a monthly payment like a standard mortgage and the client’s income will then need to be evidence to show it is affordable. “Retained” is where the interest is deducted from the loan at the outset, usually with a minimum of 12 months deducted.
  • The client will have to pay valuation fees at the outset.
  • Arrangement fees and cost of the lender’s solicitors will also be deducted from the loan at the outset.
  • This will then give you a gross loan amount and a net release to the customer on completion.

With this customer, they already have the exit planned and just need to ‘Bridge’ the gap between the purchase and the let to buy refinance. Though 12 months interest will be deducted from the beginning, the client will only ever pay for the period they use, so if they refinance after 2 months, they will only pay for those 2 months of interest when they exit the bridge.

There is typically a minimum period of 1 month before the client can exit the bridge but normally no exit fees, standard arrangement fees are 2% of the gross loan.

The other uses for bridging finance are if a property is non-mortgageable and needs refurbishment, change of use, an auction purchase or if a client needs to raise funds quickly.

To know more and speak to one of our Bridging Finance Expertscall us now on 03303 112 646. You can also fill in this short online form to get started. Our team of Bridging Loan Experts will get back to you straight away.

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Bridging Finance Case Study

A client had an initial enquiry for bridging finance. The client is resident in Bermuda and bought a property in 2018 in Suffolk. The client was prepared to spend about £850,000 for the developments on the property which has been valued at £1,000,000.

The property is unencumbered. He wanted to raise £300,000.00 net via bridging finance as he needs the funds quickly to complete the final stage of works.

Contact us today to discuss Bridging Loans and how we can assist you.

After further discussion with the client, we discovered that the client had other commercial properties which could alleviate any concerns for the lenders of it being a regulated bridging finance.

This suited the client’s needs as the exit strategy is an Expat BTL mortgage, which would be sourced through us as well as. This will give him a peace of mind that all his property needs will be dealt under the same roof.

Note: Current Max LTVs for Bridging Finance for 1st charge bridges are 75% but lower for 2nd charge bridges, typically 60%.

To know more and speak to one of our Bridging Finance Expertscall us now on 03303 112 646. You can also fill in this short online form to get started. Our team of Bridging Loan Experts will get back to you straight away.

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Bridging Finance Case Study 2

A client had an initial enquiry for bridging finance. The client had a residential property in London valued at £760,000.00 with a mortgage of £300,000.00

He wanted to raise £200,000.00 as a second charge via bridging finance as he needs the funds quickly to do work on another residential.

As this loan is a second charge regulated transaction the loan to value is limited to 60% at a rate of 0.8% it did not allow the client to raise the amount he needed.

Contact us today to discuss Bridging Loans and how we can assist you.

After further discussion with the client, we discovered that the second property had a value of £3,000,000 and a mortgage of £470,000.00. We were able to secure one loan against both properties, giving an aggregate 27% loan to value for the full amount the client needed and reducing the rate to 0.75%.

This suited the clients’ needs as the exit strategy was to sell the London property and only needed the funds for a short term and allowed the client to complete in a 2 week period.

Note: Current Max LTVs for Bridging Finance for 1st charge bridges are 75% but lower for 2nd charge bridges, typically 60%.

To know more and speak to one of our Bridging Finance Expertscall us now on 03303 112 646. You can also fill in this short online form to get started. Our team of Bridging Loan Experts will get back to you straight away.