Key Facts:
- Client: UK national and resident
- Net worth: £5-10m
- Property: £1.4m, Grade II listed, 5-unit freehold property in Bath
- Loan: 6 month bridging loan, extending the existing term and allowing the borrower to repay the existing bridge
- Product: 6-month term, 0.86% PCM
In this case, a client – the owner of a 5-unit freehold property in Bath – was looking to refinance a bridging loan as their current financing package was coming to an end.
The client had used two bridge loans to purchase and then renovate a Grade II property in Bath that needed completely stripping and refurbishing. The renovation works had taken significantly longer than expected, which meant that the client was looking for a third consecutive bridge loan. This is highly unusual as bridging finance is usually offered by lenders in the form of a one-off short-term loan for a defined purpose: a bridging loan is usually refinanced with a conventional lending product like a mortgage, rather than an additional bridging loan or an extension of a loan. The fact that this was the third bridge loan in a row that the client was undertaking meant that many lenders couldn’t consider offering a loan. With the bridging loan term coming to an end, the client asked us to help find a fast and effective solution.
The client had undertaken significant works, completely stripping it out and refurbishing it, adding very significant value to the property. The delays that had experienced that meant they needed a third bridging loan were due to external and unavoidable factors such as COVID, rather than because of project management issues.
We therefore identified that the client’s current bridging lender would be able to offer an extension on the bridging loan, given they were comfortable with the financial background of the client and their reasons for seeking another bridging loan. We quickly noted that an ‘internal refinance’ (refinancing via the same bridging lender) was priced at over 1% per month. Resubmitting a new application to the lender and going through the underwriting process a second time provided the client with a rate of 0.86% PCM, which was significantly more competitive.
It was imperative that the client would be able to finish the renovation works within the six months of the third bridging loan, as otherwise refinancing or exiting the loan would have been very difficult. The client was adamant that the works would be finished well within this timeframe and that they were able to provide a timeline and document how they would achieve this. We also looked at refinancing options for the end of the bridging loan to bring the lender more clarity on the exit and had offers to refinance onto a term loan with a gross-development-value of £2 million and an anticipated rental income of around £10,000 per month.
The client was delighted with the result given how unusual it was to secure three bridging loans in a row, and the cost saving created by reapplying for a bridging loan via the same lender. By arranging the loan for the client, they were able to oversee their project without additional stress of trying to arrange refinance, focusing on completing the project on time.
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