uninhabitable auction purchase, YO21
Our clients had recently submitted the winning bid on an unoccupied residential property with a value of £177,000 and they needed £115,000 to complete the purchase. However, the property was subject to a prohibition order which restricted anyone from living there due to safety concerns. This meant that no high street lender was willing to finance the purchase. The clients had initially approached another specialist lender, but they had withdrawn their offer. With time ticking, they needed to act extremely quickly in order to save both the purchase and the deposit they’d put down at the auction. This is when their broker contacted us.
MT Finance solution:
Understanding the time constraints the clients were under, we immediately flagged this as a high priority case. The valuation was instructed immediately and legals were issued the same day we received the report back, and just three days later we released a first charge bridging loan of £115,000 at 65% LTV. Due to the prohibition order, interest was retained at 0.95% over a 12-month term with a stipulation that the property must be made habitable before the end of the 12 months. As with all our bridging loans, our clients will not be charged any fees if they repay their loan early.
Our ability to complete a first charge bridging loan in only 10 working days meant that the clients didn’t lose the auction property or their deposit. The 12-month term gives them time to undertake a series of renovations aimed at making the property habitable again. These renovations will be funded by the clients and include a new plumbing system, new roof, new electrical system, new windows, and a damp proof course. Once the works are complete the clients will sell the property at a substantial profit, allowing them to repay our bridging loan. If this happens in less than the 12-month term, then they won’t face any ERCs or exit fees.