Short-Term Bridge Loan for UHNW Client

• Client: UK-based UHNW individual
• Property: Freehold house in Kensington
• Security value: £8.5M
• Loan amount: £1.5M
• LTV: Approximately 18%
• Product: Second charge bridging loan
• Margin: 8.49% per annum
• Arrangement fee: 1%
• Exit fee: 0.5%
• Purpose: Release funds to purchase a new property while the existing Kensington property was updated and prepared for sale

For high-net-worth borrowers with substantial property assets, a second charge facility can provide access to capital without requiring an existing first charge mortgage to be replaced. Enness was approached by a UK-based UHNW client who was looking to sell an existing Kensington property valued at approximately £8.5M and purchase another property.

The client already had a first charge mortgage secured against the Kensington property at an interest rate of 1.0% per annum, with a further 10 years remaining on the facility. As the client was 70 years old, replacing the existing mortgage with a new long-term facility was not a viable option.

The challenge was therefore to raise additional capital without disturbing the existing first charge. The client required £1.5M to facilitate the purchase of the new property while the Kensington house was updated and prepared for sale.

The existing first charge and the client’s age significantly influenced the structure of the transaction. Rather than refinancing the existing mortgage and potentially losing the favourable terms already in place, Enness considered a second charge bridging facility against the property.

The substantial value of the Kensington property provided considerable security for the additional borrowing. Against a security value of £8.5M, the new £1.5M facility represented an LTV of approximately 18% on the property, although the overall secured position also needed to take the existing first charge into account.

Enness approached the specialist bridging market and negotiated a second charge facility designed around the client’s circumstances and intended exit. The resulting loan provided £1.5M of additional capital at a margin of 8.49% per annum, with a 1% arrangement fee and 0.5% exit fee.

The facility allowed the client to access the required funds without replacing the existing first charge mortgage. The intended strategy was to use the bridging facility to support the purchase of the replacement property, while the Kensington property was updated and subsequently sold.

This case demonstrates how second charge bridging finance can provide an alternative where refinancing an existing mortgage is unsuitable. For borrowers with substantial equity and an existing first charge that they do not wish to disturb, a second charge may provide a means of accessing additional capital, subject to lender criteria and a suitable exit strategy.

Enness works with specialist lenders across the bridging finance market and can structure facilities around complex circumstances, including high-value property, existing debt and time-sensitive purchases. The appropriate solution will depend on the property, existing borrowing, available equity, borrower profile and proposed exit.

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, valuation, due diligence and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances. The rate and terms stated relate to the historical case and are not indicative of current or future pricing.

Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. A second charge creates additional borrowing secured against the property and increases the overall financial exposure attached to the asset. Bridging finance is short-term borrowing and can carry higher costs than longer-term finance. Where repayment depends on the sale of a property, delays or changes in market conditions may increase borrowing costs and affect the proposed exit. Borrowers should ensure that a realistic repayment strategy is in place.