Having stumbled upon their dream home – a grade II listed thatched cottage in the Suffolk countryside – our clients came to us looking for a way to finance the purchase of this property quickly, before it could be plucked from the market by another buyer. Ultimately, they planned to fund the purchase of the property using the cash they would generate from the sale of their main residence; however, they recognised that the sale of this property could take time, and they were eager not to let this once-in-a-lifetime property slip through their fingers.
Our clients therefore had two requirements: firstly, they needed the finance to be raised quickly; and, secondly, they needed the finance to be flexible so that they could repay the loan as soon as they’d sold their main residence.
Having expressed their preferences and talked through their options with one of Private Finance’s consultants, our clients eventually opted to take out a buy-to-let (BTL) mortgage on their target property. They then planned to rent this property out until they were able to sell their existing property, at which time they would pay off the BTL mortgage and move into their new home. This course of action, however, presented a difficulty, because the property they were looking to purchase had been valued at £585,000, but they were only able to secure a BTL loan of £285,000 due to the limited amount of rental income that the property was able to generate. Our clients had £160,000 set aside in a savings account, but even with these funds taken into account, they were still £140,000 short of the £585,000 they required.
At the time, our clients held a mortgage worth £40,000 on their main residence. We therefore approached their existing lender with the hope of securing a second charge mortgage on this property. Their lender, however, was unwilling to accept this arrangement, so we began exploring other options.
The solution we eventually arrived at involved arranging a bridging loan that would allow our clients to pay off their existing mortgage and provide them with the additional funds they would need in order to purchase their target property. Moreover, our clients expressed a preference for a loan with rolled up interest payments and a 12-month term; such a repayment option would allow them to keep their monthly mortgage payments down and provide them with what they considered to be a reasonable amount of time to sell their main residence.
We were able to secure our clients a variable rate buy-to-let mortgage worth £286,000 with a rate starting at 2.49%. Most importantly, this loan came with no early repayment charges, meaning that our clients were free to repay the loan at any time without incurring any additional charges. The second loan we were able to arrange was a twelve-month bridging loan worth £180,000 to be paid back on a rolled-up, interest-only basis at a rate of 0.48% per month. Ultimately, these loans provided our clients with the funds they needed, and they were able to purchase their dream home.