US National Bridging Loan for 10 Million Pound Property

• Client: US-based UHNW individual with a UK residence
• Property: London property valued at £10 million
• Challenge: Existing £3 million mortgage was approaching expiry, while the client required additional capital for renovations before selling the property
• Finance: £3.5 million net bridging loan at 0.48% per month over a 12-month term, with interest rolled up

Bridging finance can provide a short-term solution where an existing mortgage is approaching expiry and a property owner needs additional time to sell or refinance. It can be particularly useful where a conventional mortgage is not appropriate because the property is expected to be sold within a relatively short timeframe.

Enness was approached by a US-based UHNW individual with a UK residence who owned a London property valued at approximately £10 million. The property was subject to an existing £3 million mortgage carrying an interest rate of 6%, with the mortgage term approaching its expiry date.

The existing lender was seeking repayment of the outstanding mortgage, creating a relatively tight timeframe for the client to arrange replacement finance. As the client was a busy UHNW individual, a traditional mortgage application involving a lengthy underwriting process was not considered the most appropriate solution.

During discussions, it became clear that the client intended to sell the property in the short term. This meant that arranging a conventional long-term mortgage would not necessarily have been suitable. Instead, the priority was to secure short-term funding that could repay the existing mortgage and provide additional capital to prepare the property for sale.

The client required approximately £500,000 of additional capital to undertake renovation works. The combination of the existing £3 million mortgage and the additional renovation funding meant that a total net facility of £3.5 million was required.

The relatively low level of borrowing compared with the property’s value was an important consideration. The proposed net borrowing represented just 35% of the property value, while the gross facility, including rolled-up interest and associated costs, remained below 40% LTV.

Enness considered a range of short-term lenders before focusing on private banking contacts with experience of high-value property finance. The objective was to secure a structure that could be arranged quickly while also providing sufficient flexibility for the client’s planned sale.

Following negotiations, Enness secured a bridging loan with a net facility of £3.5 million and a gross facility of £3,735,973.08. The facility was secured against the £10 million London property.

The bridging loan was arranged at 0.48% of the loan amount per month over a maximum 12-month term. Interest was rolled up into the facility, meaning there were no monthly interest payments during the term. This helped preserve the client’s short-term cash flow while the property was prepared for sale.

The facility was also structured so that interest was payable only for the period during which the loan remained outstanding. If the property was sold before the end of the 12-month term, the facility could therefore be repaid earlier without requiring the client to maintain the borrowing for the full term.

The transaction was completed within six days from start to finish. This allowed the client to repay the existing £3 million mortgage, release approximately £500,000 towards the planned renovation works and proceed towards the intended sale of the property.

The case demonstrates how international bridging finance can provide a flexible short-term solution for overseas residents with UK property, particularly where there is substantial equity and a clear exit strategy through the sale of the property.

For UHNW and international clients requiring substantial short-term property finance, specialist lenders may be able to consider high-value assets and time-sensitive requirements where a conventional mortgage is not appropriate. Any bridging facility remains subject to lender criteria, valuation, due diligence and a suitable exit strategy.

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, security, property suitability, due diligence and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances.

Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. Bridging finance is short-term borrowing and can carry higher costs than conventional mortgage finance. Where interest is rolled up, the amount owed can increase over the term of the facility. Borrowers should have a clear and realistic exit strategy and consider the risks associated with property values, sale timescales, refinancing conditions and the ability to repay the borrowing.