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Periodically, we come across cases that we believe other property investors would be interested to learn about. The summary below is one such case, highlighting the client’s unique requirements and how we provided a solution they were happy with. We hope you find this recent case study helpful.
The Property
The property being purchased was a 5-bedroom, Grade II listed residential home.
Client Background
Our clients were high-net-worth individuals, who work directly in the financial industry and have considerable equity available in their current residence.
Client’s Requirements
Our clients had been patiently waiting to find their dream family home and when this opportunity arose on the market, they wanted to move as quickly as they could to secure this purchase. They only required short-term finance on the property with no early repayment charges, as the sale of the existing home would be able to repay this loan.
They couldn’t wait for their current property to sell first and then use the sale proceeds to purchase the new home however, as the sought-after property would no longer have been on the market by this point. The client’s preference was to get the finance that covered as close to 100% of the purchase price as possible due to the majority of their equity being tied up investments, rather than in cash.
Solution
To meet the client’s needs, we approached one of our regulated bridging finance lenders who can also take a second charge over the client’s current residential house to allow 100% funding of the purchase of their dream home. In this instance, the client’s home was worth £1.1 million with an outstanding mortgage on it of only £60,000.
The purchase price of the new property was £1,250,000 and we arranged the following to assist with this transaction.
Both the new property and current home were valued by the lender and the valuations came back as expected. The lender’s max loan to value (LTV) is 75% but due to the lender taking a second charge over the current home, it meant they could base their lending off a figure of £2,350,000 rather than just the value of the property being purchased.
As a result of this, the £1.25 million required by the client was now only at 53% loan to value which meant they could not only be provided with 100% finance but also benefited from the lender’s cheapest interest rate available which at the time of the transaction was only 0.5% per month / 6% per annum. The interest on this facility is rolled up over the 12-month term but the client will only be charged interest for the period they utilise the loan, there is no minimum interest period.
The bridging loan will be repaid by the sale of the existing home and also by the client entering into a residential mortgage on the new home to make up any difference needed to settle the bridging loan. The balance required on the residential mortgage would only be a small amount in comparison to the property’s value so it still leaves them with plenty of equity in their new home.
With the above funding in place, the client proceeded to successfully complete on the purchase of the property without any issues.
Client Feedback
We dealt with Henry at the outset of our initial enquiry for bridging finance to enable us to purchase our dream property. With speed being of the essence to enable our offer to be accepted, Henry was with us every step of the way, and was incredibly efficient and supportive in getting the transaction across the line. We couldn’t recommend him and Advocate Finance enough and look forward to working with them again at some stage in the future.
How can Advocate Finance help you?
Do you have substantial equity in your current residential property and are looking to move home? Or do you need to simply meet a strict timescale on a new residential purchase and can’t wait for your existing property to sell? We are experts in this sector and can find the right solution to suit your individual needs.
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