Bridging Loan with Multiple Drawdowns Secured for 18-Bed HMO Conversion

The Scenario

Our client was an ambitious property investor, looking to fund the conversion of their commercial property into an 18-bed HMO.

They had successfully arranged change of use permissions for the development work, despite it being partly grade 2 listed, and now needed a flexible funding solution that could be drawn down throughout their project in the most cost-effective way possible.

The current value of the property was £675k, and they were looking to raise £1.2m for the complete works along with clearing an existing first charge mortgage on the property held with a high street bank.

But for such a complex development project, they required a bespoke funding solution to keep costs down and maximise flexibility.

The Solution

We spoke to a number of specialist development bridging lenders to discuss our clients’ project.

Although they were looking to raise £1.2m in total, they only needed about £300k on day one. This would mean that their loan to value would be around 50% for the first tranche – well within lending limits – and they would only pay interest on that £300k (not the full £1.2m) until their subsequent drawdown tranches, saving them a significant amount of money on interest.

In the long term, our client was looking to refinance with a standard buy to let mortgage based on the rental income of the property.

Bridging loan brokers aren’t required by the FCA to source your refinancing if that’s your exit plan – but at Clifton Private Finance, we always make sure we discuss long term plans with our clients’ and advise on whether they’ll be able to refinance at the end of their bridging loan.

It’s part of the reason our clients keep coming back to us time and time again.