Overview
Our clients were well into retirementAs a Commercial Property type this refers to residential villages that cater for people above a certain age (perhaps over 55). The developments are more commonly known as 'Retirement Villages' and offer supported living services. and wished to downsize their central London home to a lower value house in the Surrey countryside, to be closer to their children and grandchildren.
LoanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More Type: Bridging FinanceIn Real Estate a Bridge Loan is a short-term loan that is used to cover a funding need until a longer-term arrangement can be put in place. People bridge for a number of reasons; to purchase an asset quickly (perhaps at auction), to re-furbish a property (add value), to purchase a property from a receiver / foreclosure, or if a property is not yet financeable by a traditional lender (fire damage is one example). Bridging is more expensive, due to its shorter term nature, and perceived higher risk. The repayment source or Exit Strategy, is normally sale of the asset or Re-finance (once value is added / works are completed). / Equity ReleaseWhen you take a mortgage that is higher in value than the current debt secured against the property, which allows monies to be released to the owner. The reasons vary but it could be for debt consolidation, further property investment, improving a property, business purposes, etc. More recently in the UK the term has come to prominence due to a range of Lenders offering specialist products that allow older homeowners to access the Equity in their homes now. These loans are typically not serviced and instead interest is rolled up. The debt is repaid when the owner sells the property or dies.
Property Value: £7.3m
LoanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More Size: £2.8m
LoanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More to Value: 38.3%
The Situation
Our clients owned a property that was worth approximately £5m in Notting Hill. Typically for their generation, the majority of their wealth was invested in their main home. Whilst they knew they wanted to relocate to Surrey to be closer to family, the thought of having to sell and buy at the same time and the associated stress was putting them off from making the move.
The property they were looking to buy was on the market for £ 2.75m, and wanted to complete refurbishment works before they moved in.
The Challenge
Whilst our clients had equityThe difference between the debt and the asset value; the part that the Borrower actually owns. The equity value can increase in value over time, if debt is reduced and / or the property increases in value. The reverse can also happen. See Negative Equity. wealth in their property, outside of this there wasn’t much more than some private pensions and savings. Their income would have only been able to support a very small mortgageAn agreement that allows a Borrower to borrow money from a Lender, by using a property as security for the Loan granted. The Lender will take a charge over the property to secure their Loan.. Their options were therefore to buy and sell simultaneously and endure the upheaval whilst the refurbishment work was carried out, including a new kitchen and bathroom, or to move into rented accommodation for six months. Neither option was appealing to a couple in their late sixties.
The Outcome
We were able to source a lenderA company or person that lends money to another. to secure a loanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More across both properties, enabling the clients to buy their new property and remain in London for the course of the refurb. The loanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More was enough to buy the new property and cover the costs of Stamp Duty, legal costs and the building work.
Because they didn’t have to sell their property and could complete the purchaseThe act of buying something from another person, or in property terms, buying a property from another person. extremely quickly, they were treated as ‘cash’ buyers and were able to secure the new property at £2.3m, a saving of £450k from the list price.
Once the purchaseThe act of buying something from another person, or in property terms, buying a property from another person. was complete and the refurbishment works were underway, the London property went on the market. The saleReferring to the sale of a property. We use the term in Development Finance and Bridging Finance to describe the Exit Strategy the Borrower expects to use to repay the Loan. completed five months later, which coincided with the completion of the refurbishment, leaving our clients to repay the loanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More and move into their newly refurbished, fully finished house.