Client circumstances:
Our clients submitted the winning bid on a residential property at auction, which they intended to fix up and sell for a higher profit. They wanted to unlock equity from one of their holiday rentals that already had an existing first charge to facilitate the auction purchase and they only had three weeks to close the sale and save their deposit. Knowing our ability to provide bridging finance at speed, their broker immediately got in touch with us.
MT Finance solution:
To raise enough funds to purchase the auction property and finance the refurb, we proposed a cross-charge bridging loan to be secured against both assets. Instead of opting for a second-charge on their holiday rental, our clients decided to refinance it onto a first-charge bridging loan with us. Having one lender oversee both loans made it much easier for the clients.
As time was of the essence, we worked closely with our valuer and received the valuation report within 24 hours. A week later, we issued a £252,000 cross-charge bridging loan with a cumulative loan-to-value of 54%, based on the combined open market value of the two properties at £470,000. The term for the loan was set for 12 months.
The benefits:
Not only did we meet the clients’ deadline, we also took a pragmatic view of their case to find a solution that truly worked for them. By issuing a cross-charge bridging loan we were able to provide them with the funds they needed to purchase the auction property and complete its refurb. They now have 12 months to undertake the works and sell the property against its higher value, as well as securing long-term finance for their holiday rental, allowing them to exit out of our bridging loan. If this happens before the end of the 12-month term, they won’t face any exit fees or early repayment charges.