Complex Bridging Loan Purchase for Experienced Landlord
The Client: An experienced landlord with two existing buy to let properties looking to purchase an additional flat for his portfolio.
The Property: A two-bedroom ex-council flat in a 20 story high-rise block. Situated in a city centre, the property benefitted from fantastic transport links and local amenities.
The Finance: Having found the property at auction, our client needed a 75% LTV loan to complete the purchase. He wanted to raise a little extra in order to complete a light refurbishment on the property before it was let out. Like most property investors, our client was after a competitive deal and specified that he did not want any high arrangement fees for the bridging loan.
The Challenge: While this initially appeared to be a fairly straightforward case, several details made it challenging to complete.
The first obstacle to overcome was finding a lender that accepted ex-local authority flats. While quite a few do now, the large block was less than 20% privately owned, meaning that several lenders we spoke to would not consider it. The concern was that, in the event of repossession, the lender would struggle to resell the property and recoup the debt.
Secondly, situated within a 20-storey building, we needed a lender that was comfortable with a building this size. There are still many concerns about which properties of this size require EWS1 reports, which means that lenders often cap criteria at much lower thresholds than 20 storeys.
Thirdly, as our client wanted to complete a light refurbishment on the property, the lender would need to accept the planned works and visit to check the works were completed.
Lastly, as is always a concern for bridging lenders, our client required a clear exit strategy for the loan to reassure the lender that he could repay the bridging loan.
The Solution: Due to the concerns about resale and the height of the flat’s block, none of the usual bridging lenders were keen about this case. We had to draw on our extensive knowledge of the market to approach a smaller and less well-known bridging provider who may consider our client’s property. The lender has a competitive offering and only 1% arrangement fees which we knew our client would be willing to accommodate.
The main sticking point for this lender was the risk around resale, which meant we had to demonstrate our client had adequate security available to satisfy the loan should the worst happen. After discussing possible options with both our client and the lender, we negotiated that the equity of our client’s two other buy to let properties would be able to satisfy the loan.
The final hurdle was agreeing on how to monitor the refurbishment work. After running through the plans our client had for the property, the lender was happy to do a number of visits to the property during works to ensure they were completed.
Agreements all in place, we were able to submit the application and our client completed on the property within a month! Here are the details: