DOWNSIZING: Bridging product scenario
Andrew Wright, a Directly Authorised Broker called on behalf of his retired client, Mr Alexander. His client was looking to downsize and had seen a property he wanted to buy straightaway but didn’t have the cash until he has sold his current home. The client was concerned about the speed of the sale of his existing property, as the seller of the house he was looking to buy wanted a quick sale.
It was identified the client couldn’t mortgage based on his age and his income situation, which left him considerably restricted. The value of his current property was £500,000 and he had an outstanding mortgage of £15,000. The new house value/purchase was £260,000.
Mr Alexander was 69 and retired and had a yearly pension income of £37,000. He also had approximately £70,000 in savings and investments.
Using both properties, BuildLoan was able help the client secure a bridging loan. A 1st charge was applied to the house he was buying and a 2nd to his existing property. This allowed the client to keep his current mortgage in place with a low rate of interest. On the sale of his current property the current mortgage and short term loan would be repaid.
A £260,000 loan was raised from both properties. This meant the client could move quickly to secure his new home without any cash contribution. He was able to move into his ideal home and then sell his existing property to clear the short term borrowing and any outstanding mortgage.
The costs involved a 2% arrangement fee which could be added to the loan. The loan had an interest rate of 0.54% per month, calculated on a daily basis, which could be rolled up back up into the loan and added at the end of the month. While the loan term was up to 12 months, the loan is repaid within 6 months and 5 days. The client paid back the amount borrowed, plus the arrangement fee and 6 months and 5 days of interest.
There were also professional fees, including valuation fees and legals. From application to completion and release of funds – just under 3 weeks.
GARDEN PLOT: Bridging product scenario
Broker Philip Taylor called us because his client Mr Jones was looking to purchase a property with a view to carrying out renovations and renting it out. Mr Jones, a successful landlord was looking to complete the renovation himself.
Mr Jones had arranged a buy to let mortgage for the purchase of the property. Work was needed as the lender had deemed it uninhabitable in its current state. Without the work to the property being competed, the lender was not willing provide a mortgage. The new house purchase price was £350,000 and renovations costs £80,000. The value of the property once renovated was £500,000.
BuildLoan was able to offer the client a renovation bridge to buy the property to renovate and remortgage onto a buy to let once completed. The client has a deposit of £175,000 towards the purchase and funds to cover the renovations.
The client put £255,000 of his funds as a deposit and we lent him £95,000 to complete the purchase. We then funded the renovation in three stage payments. As interest is applied on the funds drawn down, the clients will only be charged interest as the funds are required. This came with a 2% arrangement fee, an interest rate of 0.54% per month and no exit fees. There were professional and legal costs.
The client was able to go through the legal process, he received the funds within 3 weeks to purchase the property. It was fully refurbished and the broker then re-financed his client onto a buy to let mortgage based on the refurbished value.