7-day completion to prevent chain break, CB11
Client circumstances:
Our clients were in the process of purchasing a pub which they had originally planned to fund by selling a piece of land. Although they had exchanged contracts with the buyer, the sale of this land was taking longer than expected and with the sellers of the pub requiring the clients to complete the purchase by 1st July, time was ticking. They urgently required ÂŁ379,042.03 gross to prevent a chain break and with the completion date only seven days away, their broker contacted us.
MT Finance solution:
The clients needed to complete by 1st July and having received the enquiry on 24th June, we immediately flagged this as a high priority and got to work. The valuation of the security property was instructed a few hours after the initial enquiry and scheduled for 29th June. We received the report later the same day.
Unfortunately, the valuation came in lower than expected. To ensure we could still issue the amount needed to purchase the pub, we issued a comfort charge on another of the clients’ properties which was unencumbered. Having this additional security allowed us to continue as planned.
Security documentation was released 30th June. The client then attended the office the same day and the executed copies of the security documentation and full satisfactory replies to our checklist of requirements arrived on 1st July. This enabled us to complete later the same day, as per the sellers’ deadline. We issued a first charge bridging loan of £379,042.03 with an LTV of 70% across both security properties. Interest was retained at 0.79% over six months. This is a slightly lower interest rate than normal but one which was negotiated due to it being a first charge and that the clients expect to repay their bridging loan well before the end of their term. If this happens, they won’t face any ERCs or exit fees after a month of completion.
The benefits:
By thinking outside the box after a lower-than-expected valuation by taking a comfort charge over an additional property, the clients were able to purchase the pub in time. They now have another property in their portfolio as well as an additional revenue stream. The money they receive from the upcoming sale of their land will give them the funds they need to redeem our bridging loan. They are expecting this to take around six weeks and by coming to MT Finance for their loan, they won’t face any financial penalties for exiting our loan earlier than the agreed six-month term.
