We were contacted on a Wednesday evening by an applicant looking for a bridging facility of a little over £1m, urgently required to replace an existing facility that was due to end on Monday, meaning we had just 3 working days to pull this off!
Our client purchased a terraced house in London to renovate and sell. The work to the property had been finished and a sale agreed.
Unfortunately, they were unexpectedly let down with regards to a sale. This was potentially disastrous because they had previously taken out a finance facility that contained a 6% penalty for going over term!
We needed to arrange an alternative facility to repay the existing lender before the deadline, otherwise our client would incur almost £70,000 of additional charges.
A 70% loan to value bridging loan was required. The property had been substantially improved by our client, so due to the property being purchased not that long ago, and for a price much lower than its current value, we were unable to use automated, desktop or drive by valuations. We contacted a number of surveyors acceptable to our chosen lender, and managed to organised one of them to go around that afternoon (Thursday).
At the same time, we were organising the loan offer and had also instructed the lender’s solicitors so that they could get their ducks in a row. The loan offer was issued late Thursday and our client took it to their solicitor the following morning where they signed it. This was then sent to the lender’s solicitor.
Going into the weekend we were just waiting for the valuation report, which arrived, as promised, early Monday morning. The loan completed by mid-day and the client’s solicitor had the funds by 2pm, who then repaid the previous lender.
During the lead up to the referendum there were property sales agreed and contracts exchanged that contained ‘Brexit Clauses’. This allowed the buyers to have the option to withdraw from the purchase in the event of a leave vote.
Following the vote to leave some buyers have invoked this clause, leaving many sellers unable to complete on purchases that they are committed to, or don’t want to lose.
Since the UK voted to leave the EU we have received several applications for bridging finance from people effected by ‘Brexit Clauses’. As a solution we have been arranging bridging loans to provide the required funds to maintain sale chains, until replacement buyers can be found.
Often finance is required to be in place and ready to use quickly
In recent months we have seen an increase in bridging loan applications where funds are required to be available within just 48 hours.
This is often due to a property sale falling through last minute, a mortgage or other expected finance facility being withdrawn, or some unforeseen personal or business circumstance. These all usually mean anticipated funds are not available, and can cause major problems.
Fast bridging loan funding examples
1. A client contacted us who required a six figure loan urgently. They owned an investment property in London that was worth over twice the amount required and unencumbered, so was offered as security. We approved the bridging loan and emailed our client their loan documents, all within two hours. They printed out these documents and took them to a local solicitor who witnessed them before sending special delivery to the bridging loan provider. The lender prepared the loan for completion so that when the documents were received they were ready to pay the funds directly into our client’s bank account.
2. Another example was for a client who rang late one evening requiring funds that following day. They owned a buy to let property in the midlands that had a small mortgage on it.
We agreed to use this property as security and emailed the loan documents. This time we used a lender who was located close to our client, so they printed out the documents and took them directly to the lender along with identification and other pieces of information, including a mortgage statement to confirm the outstanding mortgage balance on the property. Unfortunately this loan was ready too late in the day to fund that evening, but instead was ready for the following morning.
The cost of these fast facilities
These fast payouts are achievable through a limited number of lenders who offer an efficient service and do not require full valuations or full legal work. They are by no means the cheapest lenders, but rates under 1% per month are achievable, and with limited other costs. This makes them a good facility for those loans that are required for just a very short term, perhaps whist the problem that led to them being needed in the first place is being sorted out.
Customer Requirements and circumstances
Our client owned two valuable properties in London, one that they lived in and one that had been derelict for many years. Both had mortgages secured on them together with a large bridging loan that was 2 months past it's due date. Unfortunately they had taken this loan out with an aggressive bridging company who were charging an extortionate rate of default interest due to them going over their loan term.
The existing bridging loan was taken out by our client some 14 months earlier with the plan to renovate and restore the empty derelict property, plus modernise the property that they lived in. This would greatly increase the value of both properties so that they could be sold, allowing our client to downsize and live mortgage free.
Unfortunately the client had no previous experience of property restoration and consequently greatly underestimated the cost of the works. Furthermore by working on both properties simultaneously they ran out of money without completing either property. Their existing bridging lender then refused to lend them anymore funds.
What we did to provide the bridging loan that was required
When we were contacted we visited both the properties to fully appreciate the situation. We then arranged a new bridging facility to pay off the existing bridging loan and release some funds to resume work
In addition to having retained interest for 12 months, the facility was also set up to release further funds as the different stages of work were undertaken and completed. This was in order to maximise the loan to value, keep the interest rate and charges as low as possible, and to avoid the previous problems experienced by our client from occurring again.
All work was finished within 8 months and the larger and more valuable property was sold shortly afterwards. This enabled our client to completely repay the bridging loan, leaving the remaining property unencumbered, finished and worth in excess of £1 million.
What the client had to say
We were in a very difficult situation because we had run out of money and still had a considerable amount of building work to complete on our two properties. Before speaking to KIS we were on the verge of having both properties repossessed and faced losing everything.
KIS were amazing and came up with a plan to prevent the repossessions and provide the funds required to get the properties finished. They also helped us put a works plan together, which we stuck to, finishing the work in good time and on budget.
We could have lost everything, but thanks to the help provided by KIS we now own one fantastic property, mortgage free!
Having agreed to purchase two adjoining commercial properties just outside London, our client contacted us because they were unable to secure funds via a traditional commercial mortgage. This was because both properties were in a poor state of repair, plus one of the properties was about to become vacant, causing budgeting issues.
Still wanting to acquire the properties we arranged a bridging facility to complete the purchase. The facility arranged was for a 12 month term, but could be exited at any point after 30 days without penalty.
Within 7 months the client had improved both properties, found a new tenant and agreed lease terms. A commercial mortgage was then applied for and used to repay the bridging facility.
What the client had to say
I had agreed to purchase a pair of commercial properties that I believed I could secure funds through a commercial mortgage. Following valuation a commercial mortgage was no long available so my commercial mortgage broker recommended me to KIS Finance.
They quickly arranged a bridging loan offer, making use of the valuation reports that I had for the commercial mortgage. Shortly after receiving the offer we arranged completion and the purchase was completed without any problems.
The team at KIS were all excellent. In addition they were very friendly and kept me fully updated throughout. I would certainly use them again and would highly recommend.
We received an application for a short term facility of approximately £200k in order to purchase some shares. Funds were required urgently so they could take advantage of a great deal.
Our client called us around midday on a Monday. We provided an offer within hours, and funds were in the client's bank account on the Wednesday morning.
This was just less than 48 hours from receiving the initial enquiry! In fact, funds were ready to be transferred late on the Tuesday, but the client would have not been able to do anything with them until the following morning, so we delayed sending the funds to save interest charges.
Due to a series of unfortunate circumstances Mr Anonymous had a property owned by him repossessed. He had been dealing with another broker who he had paid an administration fee to, and a bridging loan lender who he had paid further fees to, including valuation, administration and legal fees.
His application dragged on, the property was repossessed, which made things more difficult, and eventually the bridging lender he was using declined the application.
Pressure was mounting from the official receiver who was ready to auction the property, and then he found us.
Our client wanted to gain back control of the property to allow him to clear the property, carry out some urgent repairs, make some minor improvements and carry out some decoration. He would then sell it through an agent on his own terms.
We saved time and money by making use of the valuation that was carried out by the lender who let him down.
Our client got his keys back after we put a bridging loan in place within a week!
Our client contacted us to raise the funds that they required to purchase a flat in London. The flat was in a Victorian property that had previously been converted from a single house into 2 flats. Many properties in the street had been converted into flats over the years, resulting in very strong values for properties that were still single dwelling houses.
This flat was particularly desirable to our client because they already owned the other flat in the building. Acquiring the flat would enable them to convert the property back into a house, resulting in a significant increase in the value of this property.
Furthermore our client required a facility that would provide the funds required to carry out the conversion work once the necessary planning permission had been obtained, plus repay the buy to let mortgage facility just before commencement of the building work.
Circumstances / financial position
Our client had a buy to let mortgage (making use of approximately 75% of the equity) secured on the downstairs flat that he already owned, and required us to raise a facility to cover the full purchase price of the upstairs flat plus the stamp duty. We also had to have the facility in place quickly, as a quick completion had been agreed as a condition of sale.
Furthermore we also had to be able to provide the funds required to pay for the conversion work and pay off the buy to let mortgage before work could commence.
Once the property had been converted back into a house our client intended to sell it.
We used a lender who raised all of the required funds. They initially took a first charge on the flat being purchased and a second charge behind the buy to let mortgage on the flat already owned. They also agreed to increase the facility once the necessary planning permission had been obtained.
The increased facility would be used to repay the buy to let lender and also provide the required funds to pay for the conversion work. The lender fully appreciated the potential value in the property once converted back into a single home.
For speed the lender agreed to do this without obtaining second charge consent before draw down and also carried out a drive by valuation.
The second part of the facility that would provide additional funds to repay the buy to let mortgage and also fund the conversion was put in place to be drawn upon later. The reason for this was to allow the client to take advantage of the lower interest rate that they had on their buy to let mortgage facility whilst they sorted out the necessary planning permission.
What the client had to say
When the upstairs flat came on the market I just knew that I had to buy it due to the potential profit, but I didn’t know how I could find the funds to do this. I found KIS online and gave them a call. After a 20 minute of so chat with Neil, they came up with a very attractive solution. They also thought of things that I had completely overlooked, such as what my buy to let mortgage provider would have to say about our plans.
I was very impressed at the service KIS provided. I always had complete confidence in them which was not misplaced as they delivered and achieved what I initially thought to be impossible.
Client required an urgent cash injection for their business so that they could pay urgent bills and other committed business expenses in order to keep their business running. In addition the client decided to take advantage of this capital raising opportunity and increase the loan amount required, to carry out some plans that they had been considering to modernise their long established business.
The bridging loan was secured on a property that they owned, and would be repaid from money due later in the year from pending long term contracts.
Our client required finance to purchase two investment properties for him to redeveloped and sell. Funds were required for the purchase and also to carry out the required work. The full purchase price, legal fees, stamp duty and funding for the redevelopment was all required. The properties being purchased were used as security and also a second charge on a care home that our client owned and operated.
Care homes are difficult to use as security, especially as a second charge, because many lenders refuse to lend against them. Fortunately we have a number of lenders happy to lend against care homes, to the extent that over the past five years funding care home purchases or raising capital secured against them, has become a speciality of ours.
Bridging loans can prove to be a useful facility when you want to split a title but your current lender won’t allow it.
Client required funds to build 4 new houses on a plot that was part of a commercial property that he owned. They had successfully obtained planning permission for 4 new houses. The title now needed to be split so that 4 new additional titles could be created. His current commercial mortgage provider was very unhelpful as they would not agree to splitting the title, and also objected to the development taking place.
A bridging loan was used to repay the current lender and also provide the funds required to build the 4 new properties. Once completed the new houses would be sold or possibly refinanced in order to repay the bridging loan. The client also had the option to take out another commercial mortgage with a different lender on the commercial property, although the proceeds from selling just 3 of the properties would be enough to clear all borrowings.
Bridging loans can be secured against properties that are not only in various states of repair, but also of various constructions. Properties made purely of wood are popular in difficult to reach locations, where transporting the usual bulky building materials, such as bricks, can be very difficult and therefore expensive.
Circumstances and solution
We have recently secured finance for two different customers who both had properties constructed from wood to offer as security. One property was on a small island on an inland waterway in the UK. The other was in a very quiet and secluded location (think Grizzly Adams), and didn't even have running water or electricity.
Funds were raised on the one to purchase a property abroad and on the other to expand an existing business.
Arranging short term finance against these properties was a good option because it allowed both clients to make use of an asset that would not usually be regarded as suitable security by traditional lenders. Therefore also leaving their other properties and assets untouched.
What the client had to say
Having secured a real bargain on a holiday home in Europe we needed to quickly complete the purchase before it was lost to another party. Our original intention was to fund this purchase through the sale of our family UK holiday property. Because this was taking a while to sell I looked to see if a bridging loan on our home would be possible. I was provided with some options, the best one being a loan secured against my UK holiday property. This did surprise me because previously we have never been able to borrow against it.
I wanted to buy a property to renovate and sell. KIS once again arranged all the funds to purchase the property and carry out the required work using the property being purchased as security along with a small wooden bungalow on the Thames that I also own. Very happy with this option because this provided me all the funds that I required to complete the project without having to touch the equity in my property portfolio.
KIS Bridging Loans is rated 4.91 stars by Reviews.co.uk based on 75 merchant reviews
Last updated: 10 November 2017