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Our first-time landlord clients were seeking bridging finance to purchase their first investment property at auction. Find out how MFB navigated tight timescales and an increase in loan requirements to secure the finance for our clients.

At a glance:

  • First-time landlords investing via a newly set-up Limited Company
  • 2-bed end of terrace house being sold at auction
  • Bridging finance to cover the purchase and additional borrowing for refurbishment works

 

The Case:

Our clients were a pair of successful working professionals looking to start their property investment journey. With good income from their day jobs, they had recently set up an SPV Limited Company to purchase the property.

The two-bed end-of-terrace property was in reasonable condition and was being sold by a housing association at auction. The auction guide price was £90,000+, so our clients wanted to purchase in the region of £102,000 maximum. With these details, we started to arrange the decision in principle for the finance.

 

The Challenge:

Following a consultation with a local property agent, our clients increased their budget and put in a winning bid of £119,000, paying a 10% deposit. This jump in costs set back arranging the rest of the finances.

Having used their full cash deposit for the auction purchase, our clients had to source a personal loan of over £20,000 to cover the refurbishment and deposit. They estimated that the refurbishment would cost £12,000 and that the property’s value would be £175-180,000 after refurbishment. The high 85% LTV and additional borrowing were a cause for concern for many lenders.

The valuer also delayed the process, taking over 10 days to finalise a report for the lender when restrictive bridging deadlines allow up to 35 days for completion. The valuer also initially failed to provide an end value for the property following the refurbishment works. Given MFB’s understanding of bridging cases, we worked tirelessly to chase the valuer and the lender.

Our knowledge and persistence paid off. We reassured the lender of our clients’ ability to service all personal credit commitments, their home mortgage, and the bridging loan with a personal income and expenditure statement, pushing the case through to completion in time.

 

The Finance:

Property value: £119,000

Loan amount: £103,171 (Including lender arrangement fee and loan interest)

LTV: 85%

Rate: 0.94% monthly variable*

Term: 1 year

Monthly mortgage payment: £969.82

Lender arrangement fee: 2%

Monthly rental income: £850 estimated once refurbished

Gross yield: 8.6% against purchase price

 

The Review:

5* - Trustpilot

Bridging finance in a hurry!

As a first-time purchaser of a property via auction needing to secure bridging finance, I contacted MFB, where Tobie & Andy went out of their way to explain all of the options and assisted in securing the loan required within a very tight timeframe. Their communication with the lender, lender's solicitors and my solicitors was impeccable and was key to achieving the completion deadline. I now feel far more informed when I next need to take out this type of finance and will return to MFB without question, as I would recommend them to others.

 

*Rate as at March 2024

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