Bridging Loan for Semi-Commercial Property with Complex Exit Strategy

The Scenario

Our client was looking to purchase an incredibly unique property in Bath, Somerset, for £2.45m.

It was a semi-commercial property, previously being used as a conference centre for a large national business.

Our client had earmarked it to become a beautiful main residence, but he wouldn’t have the money to buy the property until his current home sold.

With his current house being a unique and high value property, it would likely take a while to sell, and he didn’t want to rush it by dropping the price.

So, he was looking to use a bridging loan of £2.55m to secure the purchase and cover the stamp duty. He would repay it when his current home valued at £2.45m sold at a good price.

However, because the property was semi-commercial and didn’t yet have change of use permissions to convert it to a residential dwelling, it meant that about 70% of bridging lenders were ruled out for his application right off the bat.

Added Complexity

The real complications arose with the valuations of the client’s current home that he was using as security and the exit for the loan.

Your lender will always require a fresh valuation for any property you’re using as security.

And this stage can be unpredictable, and occasionally causes roadblocks in bridging deals:

• Every lender uses a different panel of valuers so there’s a lot of variation in processes and outcomes
• Some can accept online valuations (quicker and cheaper), but some can’t
• And some only use a 180-day valuation, which is what they’d expect the property to achieve if it needed to be sold within 180 days (this generally works out less favourably for higher-value assets that typically take longer to sell)

The first lender we approached for this client came back with a staggering low £2m valuation of our client’s main residence, sending his Loan to Value sky-high and voiding the deal.

The Solution

We knew that the second lender we typically favour for a semi-commercial bridging loan would use a 180-day valuation, which would likely fall short for our clients’ unique property.

So, we applied with a third lender we knew would use the open market value figure.

It came back spot on at £2.55m, and the deal could go ahead.

One final complication for the case that kept our broker on his toes was that the client’s current home was also part-owned by his SIPP. He had the cash to buy it out, but it required some extra oversight of the communication between the various parties involved.

Finally, with the bridging loan secured, our client could apply for the change of use and move into their new once-in-a-lifetime property.

We think his case underscores our expertise in handling complex bridging finance scenarios – from navigating valuation discrepancies to managing unique ownership structures, we have extensive experience in thinking on our feet and adapting to our clients’ needs.