Bridging Loan With A Guarantor To Buy New Bournemouth Home

The need for a guarantor is becoming increasingly common for property finance transactions, and while we typically associate guarantors with standard residential mortgages (the bank of Mum and Dad), they can also be leveraged in bridging transactions – though, they’re not technically called ‘guarantors.

This case study demonstrates how you can get help from family members to secure a bridging loan if you can’t quite get the deal through for yourself.

The Scenario

Our client was looking to purchase a £1.1m new home in Bournemouth while he waited for his current property to sell – a fairly ordinary bridging transaction.

He needed a loan of £1m, which would provide him with funds to secure the property and give him a little extra for some light refurbishments.

However, despite securing the loan against both the property he was buying and the one he was selling, the loan to value (LTV) for the bridge was sitting at around 69%.

With the maximum threshold for this type of deal being 70% LTV, it was really pushing the limits, and it meant that even the smallest down-valuation on the property he was buying would push it over 70% and kill the deal.

Property valuations can cause havoc with getting bridging transactions over the line because they can cause big swings in loan to value ratios - as we saw in this case study.

The Solution

Our client had no other assets he could secure his bridging loan against, and he really didn’t want to compromise on the additional funds he was raising for his refurbishments – so, we explored the option of a ‘guarantor bridging loan’.

Valued at £950k, this took the LTV down for our client significantly to just 53% - and for the best bridging rates on the market, under 55% LTV is often the sweet spot (although it varies depending on the complexities of the case).

And the good news for the father was that he didn’t need to be counted as an applicant for the loan – so there was no need for additional forms and paperwork on his behalf, and there was no threat to his credit score.

This case demonstrates the value of speaking to a qualified bridging loan broker when exploring your options – many people would have either settled for a higher rate in this situation, risked their deal falling through from a low valuation, or compromised on their loan value.