I recently helped a UK national finance a semi-commercial property, which was being refinanced from a bridging loan.
I had worked with the client previously, securing the original bridging loan which enabled them to purchase the property – a £2million semi-commercial property in Fulham. The property in question comprised commercial space downstairs, and two residential flats upstairs. Read more about residential bridging loans.
When buying the property, a bridge was required; firstly, there wasn’t enough time to secure a commercial loan. Secondly, my client didn’t yet have tenants to occupy the commercial space – something a lender prefers to be in place before agreeing to lend against it.
Now they had found tenants for the downstairs and wanted to refinance from the bridging loan to a commercial loan as the bridge was expensive and they wanted to move onto a repayment mortgage.
There were a couple of challenges with this case, including the fact the upstairs space actually didn’t have planning permission to be two flats. The previous owner had split it in two without seeking the appropriate permissions, and my client had inherited this issue without knowing. This puts lenders off and can bring down the value on a valuation report, even if not the purchase price.
Furthermore, the owner wanted a long-term repayment mortgage – but the leases were all under three years, and normally lenders would match the lease term to the term of the mortgage. This made finding a lender who would offer a longer term a challenge.
Because we have access to the entire market of lenders, that includes brand new entrants. As a result, I was able to find one who was keen to flex their requirements in order to take on new deals, overlooking the obstacles focusing on the income generated from the commercial tenants my client had found.
The lender was also willing to offer a longer term, over 20 years on a full capital repayment basis, at a rate of 6.25%.