EXPRESS BRIDGING LOANS

Bridging loan to fund purchases at auction:

Ms B wanted to build up a small portfolio of investment properties. After intensive research she felt the best way to purchase the properties would be at auction. Ms B was successful in her bid for a property at her first auction and managed to secure a property with a market value of circa £250,000 for just £190,000. A deposit of £19,000 was paid at the auction and an application lodged with her long term lender for the balance. This is where the problems started. Whilst the long term lender was prepared to consider a loan of up to 85%, this would be based on the purchase price rather than the market value. Ms B had been expecting a loan of up to £212,500 – which would have provided additional funds for further purchases, whereas the lender only offered £161,500 – which left Ms B short of cash for the purchase. A bridging loan is always based on the market value of a property, irrespective of other considerations. A bridging loan of £175,000 was made available to Ms B to support the purchase, which with the deposit paid covered the purchase, set up charges and interest due on the bridging loan. The purchase was completed within 14 days [as per the auction terms] and as MS B now owned the property her lender was prepared to consider an advance based on the market value of the property. A loan of £212,500 was granted which repaid the bridging loan, and provided additional funds for further purchase.

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