Semi-commercial Bridge Loan Against A Hard Deadline

• Client: Norwegian National, UK Resident
• Property Type: Semi-commercial property
• Property Value: £2,450,000
• Loan Amount: £1,530,000
• LTV: 70%
• Interest Rate: 0.9% per month, fixed for 6 months
• Repayment: Interest-only

Enness was approached by a Norwegian national and UK resident who was looking to acquire a semi-commercial, multi-unit property in London being sold at auction. The transaction was subject to a tight completion deadline, meaning the client needed to secure finance quickly while ensuring the facility was structured around the circumstances of the purchase.

Auction purchases often require buyers to move considerably faster than they would with a conventional property acquisition. Once a successful bid has been made, the buyer will typically have a limited period in which to complete the purchase. Auction finance, usually provided in the form of short-term bridging finance, can therefore provide the speed and flexibility required to complete the acquisition.

In this case, the property had been down valued prior to the auction, creating an additional challenge. The client required £1.53 million of finance, but the valuation meant that achieving the required level of borrowing against the property alone was more difficult. A down valuation can restrict the amount a lender is willing to advance, even where the underlying property represents a viable investment opportunity.

Enness identified a specialist lender with the appetite to consider the transaction and the amount of finance required. To provide the lender with additional comfort, Enness carefully presented the client’s plans and negotiated a structure that included additional security. This allowed the lender to take a broader view of the overall transaction rather than assessing the property in isolation.

Enness successfully secured a £1.53 million auction finance facility, structured at 70% LTV with a fixed interest rate of 0.9% per month over a six-month term. The facility was arranged on an interest-only basis, giving the client the short-term funding required to complete the acquisition while providing time to identify a longer-term financing solution.

The case demonstrates the importance of acting quickly when purchasing property at auction, particularly where a property has been down valued or the required loan amount is significant. Specialist bridging and auction finance can provide a route to completion where conventional mortgage finance may not be achievable within the required timeframe.

By understanding the client’s requirements, the property and the proposed exit strategy, Enness was able to identify an appropriate lender and negotiate a structure that addressed the valuation challenge. The six-month term also provided the client with additional time to refinance the auction facility onto a more suitable longer-term arrangement, subject to lender criteria.

Risk Warning:
Auction and bridging finance carry risks. Short-term finance can be more expensive than conventional mortgage finance, and borrowers must have a credible repayment or exit strategy. Changes in property values, delays to refinancing or difficulties selling or refinancing the property could affect the ability to repay the facility. Failure to meet repayment obligations may result in enforcement action against secured assets.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Finance is subject to status, underwriting, valuation, project assessment and lender criteria. Terms and availability will vary depending on individual circumstances and the proposed transaction.