Second Charge Bridging Loan Against a £4.5M Property to Increase The Value Substantially

• Client: UK homeowner
• Property: Residential home valued at £4.5m
• Existing Mortgage: £1.4m
• Additional Finance: £1m second charge bridging loan
• Projected Value: Approximately £6.5m following refurbishment
• Product: Second charge bridging loan
• Interest Rate: 0.89% PCM

In this case, we were approached by a homeowner who wanted to substantially increase the value of their property before selling it. By completing a significant refurbishment, the client expected to increase the property’s value from approximately £4.5 million to £6.5 million. The objective was to maximise the equity available from the sale, allowing the client to move to a new home and upsize without needing to take on a substantially larger mortgage.

The property was already subject to a £1.4 million mortgage, and the client required a further £1 million to complete the refurbishment works. Some of the works had already been funded personally, so the additional borrowing would also allow the client to replenish some of the funds they had already committed while providing the capital required to complete the remaining works.

Speed was particularly important. The client wanted to finish the refurbishment quickly and sell the property immediately afterwards, meaning a standard mortgage application would not have provided the flexibility or speed required. A bridging loan was therefore considered the most appropriate short-term solution, despite the higher cost associated with this type of finance.

The client also wanted to avoid being locked into the facility for a fixed period. As they intended to repay the borrowing from the sale proceeds as soon as the refurbishment was complete, having no early repayment charges was an important requirement.

Chris Lloyd, one of Enness’ Partners, based in the London office, was able to negotiate a second charge bridging loan with no early repayment charges. This gave the client the flexibility to repay the facility at any point without incurring an additional penalty once the property was sold.

Enness also negotiated for the lender’s arrangement fee and interest payments to be added to the facility rather than requiring the client to make ongoing monthly payments. This meant there were no monthly servicing costs during the term, with the loan, interest and fees capable of being repaid from the eventual sale proceeds.

The resulting facility was arranged at 0.89% per month, providing the client with the short-term capital required to complete the refurbishment while retaining flexibility around the timing of the eventual sale and repayment of the loan.

This case demonstrates how second charge bridging finance can provide a flexible source of capital where an existing mortgage is already in place and additional borrowing is required for a time-sensitive property project. For homeowners looking to release capital without replacing their existing first charge, a second charge facility may provide an alternative route, subject to the lender’s assessment and the overall circumstances.

Risk Warning:
Bridging finance is secured lending and carries risks. If you do not meet the terms of the facility, the lender may take enforcement action against the property used as security. Property values can fall, refurbishment projects can experience delays or cost increases, and a clear and realistic exit strategy is essential when considering short-term borrowing.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Finance is subject to status, underwriting, property assessment and lender criteria. Terms and availability will vary depending on individual circumstances. Enness does not provide legal, tax or investment advice, and lender introductions are unregulated.