US National Bridging Loan for 10 Million Pound Property

As UK base rates continue to fall, forecast to flirt with negative territory in the short-term, many homeowners are looking to remortgage properties and take advantage of reduced mortgage rates. We are regularly approached by overseas investors with UK property who are looking at refinancing opportunities. This case study involved a US client, with a UK residence and a mortgage which was about to expire.

Client scenario

The property in question was worth £10 million with a 3 million pound mortgage outstanding on a relatively high-interest rate of 6%. The mortgage was about to end and the lender was pushing the client to repay the loan in full. As a busy UHNW individual, time was of the essence but the client was not in a position to “jump through” the traditional underwriting hoops to secure funding. During introductory discussions, it was revealed that the client was looking to sell the property in the short-term and therefore a long-term mortgage solution was not appropriate. They were also looking to raise an additional circa £500,000 to fund renovations to ensure that the property was ready for the market.

The basic scenario was as follows: –

Client: U.S. based
Property Location: UK
Property value: £10 million
Outstanding mortgage: £3 million
Mortgage interest rate: 6%
Mortgage term: About to expire

So, the client needed a very quick short-term solution which involved repaying the £3 million mortgage via a bridging loan. The fact that the client was a UHNW individual meant that the best course of action would involve a private bank. Aside from the fact that the client was extremely wealthy the eventual gross bridging loan LTV was less than 40%, so there was no need for an in-depth review of the client’s income and finances.

The solution

In this particular situation, the key was a relatively quick turnaround while still maintaining a competitive headline interest rate. As we have a number of private bank connections we were able to induce a degree of competition to extract the best rate possible.

The exact details of the funding solution were as follows:-

Property value: £10 million
Outstanding mortgage: £3 million
Gross bridging loan: £3,735,973.08
Net bridging loan: £3,500,000
Interest rate: 0.48% of the loan each month
Monthly payments: £0 (the interest was rolled up)
Mortgage term: 12 months
Loan type: Interest only

Even though short-term bridging loans tend to attract higher interest rates than traditional mortgages, in this instance there was a slight saving on the previous 6% mortgage interest rate. As the loan interest was rolled up there were no monthly payments which assisted short-term cash flow. While set at a maximum one-year term, the bridging loan was flexible with interest paid only on months in which the loan was active. Therefore, if the property was sold prior to the maximum 12-month timeframe then the loan would be repaid and level of interest adjusted accordingly.

What can Enness do for you?

The real estate market today is truly global and we are regularly contacted by overseas investors with UK assets. On this occasion, by using our private banking contacts the funding was secured in just six days from start to finish. This ensured that the client was able to repay their outstanding £3 million mortgage, add an additional £500,000 to the bridging loan to assist with renovations and then look to sell the property. Private banks are often the most appropriate for UHNW and HNW individuals looking for swift finance decisions with minimum fuss.

As an independent broker, we have access to more than 300 different lenders and very strong relations with many of them. This allows us to introduce a degree of competition when negotiating the best terms. Also, we know who to approach for different situations, how to approach them and the type of information required. It is fair to say this particular client was extremely satisfied with the outcome and the very short turnaround time.