Our clients – a married pair of professionals – were looking to purchase a 6-bedroom, £1.82m end-terrace property in Fulham. They had a deposit of £366,000 and a combined income of sufficient size to be able to expect to have their mortgage application accepted. The issue they faced, however, was that the residential property on which they had set their sights had two kitchens and two titles. They intended to knock through the walls, remove one of the kitchens, and turn the adjacent properties into a single-family home, but in order to make these changes, they needed a mortgage to purchase the home, and in order to secure a residential mortgage, they needed to make the mentioned changes. They were thus ensnared in a catch 22. This was when they came to Private Finance.
At first glance, this seemed to our broker like a case requiring bridging finance: they would arrange a short-term bridging loan; the clients would use these funds to purchase their desired property and make the necessary changes; and then they would obtain a standard residential mortgage and repay the bridging loan in full. There were, however, problems with this: for one, our clients were averse to paying the additional costs associated with bridging finance, which would in this instance have been considerable. Moreover, very few lenders would have been willing to offer our clients a bridging loan of the required amount because of the high loan-to-value percentage that the loan would have to be (80%).
With strong working relationships with a large number of building societies and banks, we were on this occasion able to arrange a highly agreeable deal for our clients. Firstly, the vendor of the property was willing to allow our clients to go into the property and make the requisite changes before the deeds had been exchanged. We were able to locate a lender that was happy with this arrangement and who was willing to release the funds once these renovations had been made, and with this agreement in place, our clients were ultimately able to purchase their desired property.
We were eventually able to secure our clients a 2-year fixed rate mortgage of £1,454,000 with a rate of 1.84%.