Client circumstances:
Our clients were a property development company who were the winning bidders on a former department store valued at £750,000. They initially needed £375,000 to complete the investment purchase with a portion going towards substantial works which included a modernization of the property and the building of eight new residential apartments.
As the property had been purchased via auction, the clients needed to secure a short-term fix extremely quickly to ensure they didn’t lose their 10% deposit, or the property. This is when their broker contacted us.
MT Finance solution:
After working closely with the valuer and the solicitors, we released a bridging loan of £375,000 at 50% LTV of the property’s value of £750,000. Interest was retained at 0.75% over a 12-month term.
The clients can request up to four further drawdowns as the works progress, which – combined with the first tranche – can total up to £875,000. Each request for further funds will be based on the property’s value at that specific time and is subject to the LTV on total borrowing not exceeding 50% and a 50% cap of the GDV. As the works continue, the market value will increase, allowing for further borrowing.
The benefits:
Our bridging loan ensured that the clients were able to purchase the investment property without losing their deposit. The works they have undertaken will increase the property’s value as well as making it more attractive to high street lenders. This will enable the clients to refinance out of our bridging loan with a traditional buy-to-let mortgage based on the property’s higher value. They won’t face any exit fees or ERCs if this happens before the end of our 12-month term.
Once the works are complete, which will happen during our loan term, the clients will have a new multi-unit property in their portfolio which they expect to generate an estimated £162,000 in rental income per year.