- Client: UK-based property investor
- Property: £2 million semi-commercial property in Fulham comprising commercial space and two residential units
- Challenge: Required an exit from bridging finance, with planning and short lease issues creating additional lender considerations
- Finance: 20-year capital repayment commercial mortgage at 6.25% at the time
Refinancing a semi-commercial property from bridging finance can become more complicated where there are planning considerations and short existing leases. Enness was approached by a UK-based property investor looking to refinance a £2 million semi-commercial property in Fulham.
The property comprised commercial space on the ground floor and two residential flats above. The original acquisition had been funded using a bridging loan, as there had not been sufficient time to arrange longer-term commercial finance before the purchase completed. At the time, the commercial space was also vacant, making conventional commercial lending more difficult to arrange.
Once tenants had been secured for the commercial space, the client wanted to refinance the bridging facility onto longer-term commercial property finance. The bridge had served its purpose during the acquisition, but moving onto a repayment mortgage would provide a more appropriate long-term financing structure.
There were several additional considerations for the refinance. The upstairs accommodation had been divided into two flats by the previous owner without the appropriate planning permission. The issue had therefore been inherited as part of the property ownership and had the potential to affect both the lender’s assessment and the valuation.
The lease arrangements also created a challenge. The client wanted a long-term repayment mortgage, but the existing leases were each for less than three years. Lenders will often consider the remaining lease term when assessing commercial property finance, making it more difficult to secure a mortgage extending significantly beyond the existing lease arrangements.
Enness reviewed the available lender options and identified a newer entrant to the market that was prepared to take a more flexible approach to the application. Rather than allowing the planning and lease considerations to prevent the refinance, the lender focused on the income being generated by the newly established commercial tenancies and the wider property proposition.
The lender was also prepared to offer a substantially longer mortgage term than the existing leases. The resulting facility was structured over 20 years on a full capital repayment basis, at a rate of 6.25% at the time.
This provided the client with a route out of the original bridging facility and into longer-term commercial finance, while allowing the property’s established rental income to support the new borrowing structure.
The case demonstrates how specialist property finance can be valuable where a semi-commercial property has multiple considerations that may restrict conventional lending. Planning history, lease terms, commercial occupancy and the transition from bridging finance can all influence which lenders are prepared to consider a case.
For investors refinancing semi-commercial property, access to a broad range of lenders can be particularly important where the property or existing financing structure does not fit standard commercial lending criteria.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, valuation, property suitability, planning and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.
Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise. Commercial and semi-commercial property investments can be affected by changes in rental income, tenant demand, lease terms, property values and market conditions. Borrowers should also ensure that any planning and property-use requirements are appropriately addressed.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
