Bridging Loan to Pay Inheritance Tax Bill Before Selling Inherited London Property to Cover Costs

The Scenario

In this case, the clients approached a broker in a unique situation requiring much personal care and sensitivity.

The client was a young woman who had just lost their mother. They had lived together in their family home for her entire life, so it was a challenging transition period for the client.

Our client had no other siblings or family of any kind and was tackling the administration of processing her mother’s estate by herself.

There was a small outstanding mortgage in her mother’s name secured against the property at the time of her death, and the client was still waiting for probate to be confirmed for the estate.

However, she needed to pay an outstanding inheritance tax liability of 10% before the property could be passed into her name. The client had no savings or assets to liquidate to cover the bill. Her only option was to sell the property, worth approximately £900k, which she couldn’t do until it was transferred into her name. So, a Catch 22.

She had approached multiple finance brokers to see if she could arrange a short-term loan to pay for the tax bill, to then be repaid upon the sale of the property once it was in her name.

However, she’d been turned away by every broker she’d spoken to because they couldn’t secure a loan against a property that wasn’t legally in her name – and it wouldn’t be until she’d paid 10% of the IHT bill that this would happen.

To make matters even more complicated, the client also had:

• No income
• No credit score
• Additional credit card debts

The Solution

Contacting a specialist bridging lender was the clients’ last hope. They needed to speak to somebody with years of experience, extensive knowledge, and the right connections to explore every possible solution.

Through 3-4 months of dedicated work alongside the clients’ solicitor, their broker managed to push this case through with a specialist lender that they worked closely with, who was able to take a comprehensive overview of the clients’ situation.

While they would normally reject such an extraordinarily complicated proposal, the additional context and legal reassurances provided by the broker and solicitor gave the lender enough comfort to eventually offer a bespoke bridging loan secured against the property that was technically still in her mother’s name.

They provided a 12-month bridge loan of £360k that covered:

• The late mother’s outstanding mortgage on the property
• The entire inheritance tax bill
• The cost of refurbishments to the property that would be carried out before its sale
• And living costs throughout the loan term while the property was being sold.

And the loan was arranged to be paid out as soon as Probate came through so that they could act immediately.

The loan would be repaid upon the sale of the property, and the 12-month term allowed our client to carry out work on the property and give it time on the market to realise its full potential value.

The value of the bridging loan came to 40% of the property's value (40% LTV).

And finally, the interest on the loan was also rolled up to be repaid at the end of the term or upon loan redemption, ensuring that the client had sufficient cash flow for the year and didn’t have to worry about monthly interest repayments.

The bespoke finance solution completely transformed the client's options in front of them. It provided her with the invaluable peace of mind that she could resolve her financial situation and move forwards to the next chapter of her life.

Related: Can I Get a Bridging Loan to Pay Inheritance Tax?