The call came through at a weekend: a couple had bought their classic London terrace in Shepherd’s Bush 15 years ago for a now-unbelievable £290K. (A leasehold maisonette – the lower flat was separately owned.)
They were mortgage-free, and had saved £150K to get a major renovation underway: a loft extension and side extension that re-mapped the footprint of the building.
They were pretty much at bare walls stage: no kitchen or bathroom, no boiler or proper living space. They just needed another £150K to finish off their project.
They approached another firm of brokers at the same time they came to us.
We looked at their architectural plans, their schedule of works and builder’s report and said: “You won’t get a mortgage at this stage, but we can set up bridging finance for you.”
The other brokers told them they could get mortgage finance – so of course the clients went with them.
Three and a half weeks later, they’d paid for a valuation which gave the prospective lender a Nil valuation for a mortgage. The property was categorically classed as “uninhabitable” in its current state, and their application was refused.
The client had lost valuable time spending their own cash reserves to keep the project afloat – plus the cost of the valuation.
Back to us, and we knew that the regulated bridging lender we work with (who is able to offer finance on homeowner projects) wouldn’t be focused on mortgageability. They’d be looking at the value of the site and the bricks and mortar, the amount of money that had been spent on the project, and its future value.
Their valuer put a value of £650K on the property in its current state, with a projected GDV of £900K.
We double-checked that they’d accept this as now being a light refurbishment rather than a heavy refurbishment: a difference of 0.2% per month on the rate. They would. (On larger borrowing this would be a really significant saving.)
Finance arranged at 0.55% over 12 months, with just a 2% arrangement fee, and no exit fee: the clients expect to be finished in six months, and we’re setting up their exit onto a residential mortgage.
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