Bridging loan and exit onto mortgage for Staffordshire farmhouse renovation

Our clients had found a Cinderella project: a Grade II-listed traditional Staffordshire farmhouse with land and outbuildings. But… it had been standing vacant for a number of years, with the lead stolen from its roofs, and its copper plumbing stripped out. For finance, it was an interesting challenge.

The Scenario

Our clients could buy the property at a £50K discount on the £450K asking price if they could get finance set up reasonably quickly. They came to us looking for a mortgage.

There were a few lenders who might have taken this on as a mortgage proposition, but considering the state of the property, the rates would have been woundingly high.

When we reviewed the options we were able to show our clients that a bridging loan refinanced onto a mortgage would work out cheaper – even with set-up fees and costs.

The Solution

1 The bridge finance

We were looking for 75% LTV of the asking-price valuation, which would allow them to pay for the purchase, the cost of the works and the cost of the interest payments.

We took their case to a lender who provides bridging finance for both light and heavy residential refurbishment bridges (so if the project didn’t qualify as light, we wouldn’t need to go for another valuation with a different lender for heavy refurb finance).

We needed to push a bit to persuade the lender the works met their criteria for a light refurbishment (roofing works, new kitchen, plumbing…). The difference saved our clients 0.25% a month.

Bridging was arranged for a nine month term, with no exit fees, so they had sufficient time to do the work but could get off bridging rates ASAP.  

2 The mortgage finance

When it came to setting up the mortgage as exit from the bridge, our clients had purchased an adjacent parcel of land and wanted to split the title. One title would have the farmhouse and the new land. The other title, with one of the barns and a strip of land, could be sold off.

We needed to find a mortgage lender who was prepared to consider a change of title, and whose valuation would be of the future configuration, not the present land division.

The lender we proposed is quite flexible and provides a free valuation. They also offer two alternatives for legal costs: either free legal services provided, or a £500 cashback towards the client’s legal fees.

We recommended the cashback deal and instructing a specialist solicitor who could handle the exit from the bridging loan and splitting the title.

We got them the 10-year fixed rate they wanted for a competitive 2.69%.

Read our blog with more details of the process »