Residential Bridging Loan to Fund Renovation on New Home
The Client: Having inherited a 50% share of the large family home where she resided, our self-employed client was looking to down-size. She and her husband had purchased the new property, but it needed a substantial amount of renovation work before they could move in.
The Property: A five-bedroom semi-detached family home, located in a desirable area on the outskirts of London. Our client intended to continue living here while the renovation works were completed on the new property, partly due to convenience and also to save money on temporary rental accommodation.
The Finance: To complete the renovation works on her new, smaller property, our client wished to use the inherited home as security for a residential bridging loan. Once the works on the new property were complete, they could sell the larger home and repay the bridging loan.
Although she only owned 50%, her sibling agreed to be included on the bridging finance application so she could use 100% of the property as security. Doing this increased the amount she could borrow for the renovation works and simplified the process.
The Challenge: Initially, we thought our only challenge would be to source the most competitive rate for our client, which at 18% LTV we were confident wouldn’t be too difficult!
However, having applied to our first-choice lender, in-depth credit checks revealed that our client’s sibling had a small black mark which the criteria would not accept. Therefore, we needed to source a lender that would permit the minor imperfection in order to complete the case.
The Solution: Now with full disclosure about the credit issue, we were able to re-consider criteria and approach a bridging lender that we knew would be more accommodating. As the credit issue was not substantial debt, mortgage arrears or similar, we knew that explaining the circumstances to a lender would likely prevent any further problems because it would not impact the loan security. So, we were able to approach the second-choice lender for the case. Due to the strength of the security property and the low loan to value, they were completely comfortable with the application and happy to proceed.
In order to keep costs down for our client, we had sourced bridging lenders that could do online valuations with no additional fee. The other benefit of this is that it often speeds up the process a little bit! Our second-choice lender could do this and had a competitive rate that our client was happy with, and we were able to complete the case. Here are the details: