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4.97 out of 5 based on 2,400+ reviews

Client Uses Bridging Loan To Regain Financial Stability And Fund Downsizing To Their Annexe

October 15th, 2024

Rated 4.97 out of 5 from 2,400+ reviews

About This Case

The client, aged 76, had been through a period of difficult personal circumstances that led to their finances becoming hard to manage. Over time, they had drifted onto a very high standard variable rate mortgage, leaving them with monthly repayments of approximately £4,000. With their only income being the state pension, these payments were draining their retirement savings at an unsustainable rate, creating both financial and emotional stress.

The client had a clear long-term plan: to convert a sizeable annexe located across a private road into a single residential dwelling, move into it, and sell the main property to fully repay the loan and release equity. To achieve this, they needed planning permission and a formal split of the property titles — a process that required time, flexibility, and the right lending solution.

How Private Finance Helped

Recognising that traditional mortgage lending was not a viable route given the client’s income profile, the Private Finance broker focused on finding a lender experienced in bridging finance who was comfortable with an exit strategy that was structured but not yet fully in motion.

The key challenge was that the main property had not yet been listed for sale, and planning permission for the annexe conversion still needed to be obtained.

Rather than treating these as obstacles, we identified a specialist lender willing to conditionally approve the loan on the basis that the property would be listed for sale by month six of the loan term. This gave the client the breathing room they needed to progress the planning application and complete the title split without unnecessary pressure.

A secondary exit strategy was also agreed with the lender: in the event that planning permission was not granted, the client would have the option to sell both the main residence and the annexe together, downsizing using the combined equity. Having this fallback gave both the lender and the client confidence in the overall plan.

The Financial Detail

Beyond clearing the existing mortgage, the broker secured an additional £125,000 within the bridging facility. These funds were allocated to cover the annexe refurbishment costs, repay debts that had accumulated while servicing the previous mortgage, and establish a 12-month contingency fund to provide financial security throughout the loan term.

Crucially, the bridging loan was structured on a non-serviced basis, meaning the client had no monthly interest payments to meet — a significant relief compared to the £4,000 monthly burden they had been carrying. The annualised rate on the bridging loan also came in lower than the rate on their existing SVR mortgage, demonstrating that bridging finance, often perceived as an expensive last resort, can in the right circumstances provide a genuinely cost-effective solution.

Why A Bridging Loan Made Sense

For clients whose income does not meet the affordability criteria of conventional residential mortgages, bridging finance can offer a practical and flexible alternative. In this case, the client’s state pension income ruled out standard mortgage products entirely. A bridging loan provided the short-term solution needed to stabilise their finances, progress their long-term downsizing plans, and remove the monthly mortgage burden that had been eroding their savings.

Throughout the process, Private Finance worked closely with the client and their estate agent to coordinate the eventual sale of the main property, ensuring the exit strategy remained on track and the client felt supported at every stage.

If this scenario resonates with you or you’re seeking personalised mortgage advice for another situation, please get in touch — we’d be happy to see how we can help. Call us on 0800 652 0971 or email info@privatefinance.co.uk.

Disclaimer: The information presented in our case studies is intended for illustrative and marketing purposes only. Some case studies may be based on multiple enquiries or hypothetical scenarios to demonstrate typical processes or outcomes. Not all case studies represent completed business transactions, and the inclusion of a case study does not imply that the business was successfully concluded.

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Client Uses Bridging Loan To Regain Financial Stability And Fund Downsizing To Their Annexe

About This Case

How Private Finance Helped

The Financial Detail

Why A Bridging Loan Made Sense

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