The Challenge
The client owned their current residential home, which wasn’t on the market and required work to be sale-ready. With no savings to contribute and the vendor eager for a quick sale, time was of the essence. Mainstream brokers advised a let-to-buy mortgage combined with a standard residential mortgage, but this posed two major issues:
- Insufficient Funds: The let-to-buy mortgage didn’t release enough equity to cover the purchase price and stamp duty for the new home.
- Time Constraints: The process for securing a let-to-buy mortgage and residential mortgage would take too long, risking the vendor pulling out.
Our Solution: Thinking Outside the Box
Recognising the urgency and complexity, we proposed a bridging solution:
- A Second Charge on the Current Property: This allowed the client to release equity without selling immediately.
- A First Charge on the New Property: This ensured enough funds were available for the purchase and stamp duty.
This creative solution enabled the client to secure their dream home without delay.
Preparing for the Bridge Exit
Bridging finance is a short-term solution, so the focus shifted to a robust exit strategy:
- Understanding the Numbers: We thoroughly reviewed the client’s finances, educating them on the repayment requirements and timelines.
- Planning the Exit: The plan involved selling the existing property to repay most of the loan. However, a small balance would remain, necessitating a “future residential mortgage.”
- Pre-Emptive Approval: We worked with a residential lender to obtain an Agreement in Principle (AIP), ensuring the client would qualify for a mortgage once the bridge was repaid.
Execution and Success
The bridging finance was secured, and the purchase of the dream home was completed within the vendor’s timeline.
- After completion, we immediately submitted the residential mortgage application, ensuring no delays in refinancing the bridge.
- The old property was sold within six months, and the remaining balance on the bridge was settled with the residential mortgage.
Key Lessons for Bridging Success
This case highlights the importance of working with a broker who:
- Thinks Outside the Box: Standard solutions aren’t always the best fit.
- Prepares for the Future: Planning for the exit strategy is as critical as arranging the bridge itself.
- Safeguards Clients: By pre-empting lender requirements and potential challenges, we protected the client from financial stress.
The clients were thrilled with the outcome, not only securing their dream home but also gaining a clear financial path forward.
If you’re facing a complex property transaction, contact The Landlords Broker. We’re here to navigate challenges, offer innovative solutions, and make your property dreams a reality.