The client, aged 76, had been through challenging personal circumstances and had lost track of their finances. They had a mortgage with a very high standard variable rate (SVR), resulting in monthly payments of approximately £4,000.
The client’s only income was from their state pension, which made the mortgage a drain on their retirement savings and led to an unsustainable and stressful financial situation. To alleviate this strain and secure their long-term plans, the client intended to convert the sizeable annexe across a private road through planning permission and sell the main property, with the final goal of residing in the annexe.
Recognising the need for a flexible lending solution, our Private Finance broker had to find a lender that was comfortable with the fact that the property wasn’t yet on the market and would require time for the client to get to this position.
We arranged a bridging loan with a lender comfortable with the client’s exit strategy. They agreed to conditionally approve the loan with the understanding that the main property would be listed for sale by the sixth month of the loan term, allowing ample time for planning approval and splitting of the titles. As a secondary plan, if planning was not granted, the client would have the option to sell both the main residence and the annexe together and downsize with the equity.
To further ease the financial situation, the broker secured an additional £125,000 in funds to cover renovation expenses on the annexe, pay down debts that had accumulated by servicing the present mortgage, and create a contingency fund for the coming year. This setup significantly reduced their monthly outgoings as the bridging loan was not serviced and also offered a lower annualized rate than his existing mortgage – demonstrating that, contrary to the misconception that bridging is too expensive, it can provide a cost-effective solution, as it did here to help the client regain financial stability.
Traditional financing options were not possible given that the client’s income was limited to a state pension. A bridging loan provided essential flexibility, enabling them to move toward their longer-term goals without the heavy monthly mortgage burden.
Throughout the process, we ensured the client was supported and reassured, working closely with the estate agent to coordinate the eventual sale of the main property.
For more details on how bridging loans can support similar transitions, contact us at 0800 980 8777 or email info@privatefinance.co.uk.
