This case study illustrates how we helped a client secure an 80% LTV bridging loan to purchase and renovate an auction property, ensuring a smooth exit to a standard residential mortgage post-renovation.
The Challenge
Our clients, a young couple, had successfully bid on a fixer-upper property at auction. The property price was £200,000, and they needed to raise as much cash as possible toward the purchase. Although they had some savings set aside for the purchase and to cover renovations, they needed a quick, high-LTV bridging loan to complete the purchase within the tight auction deadline.
Their ultimate goal was to renovate the property and refinance onto a standard residential mortgage, which they were confident of qualifying for based on their stable earnings and financial situation. However, they required expert guidance to structure the deal, secure the bridging finance quickly, and ensure they had the right exit strategy in place.
The Solution
We began by securing an 80% LTV bridging loan to cover the majority of the auction purchase price, minimising the amount the couple needed to contribute upfront.
We advised the maximum they’d be able to borrow would be roughly £145,000, as loan-to-value ratios are calculated gross of fees (plus interest as if the loan term runs to full) for bridging loans – so, their gross loan would come to approximately £160,000: 80% of the purchase price.
Our role didn’t end there. Knowing that a strong exit strategy is key to obtaining bridging finance, we simultaneously advised the couple on their future residential mortgage. We worked on securing an Agreement in Principle (AIP) from a mainstream lender, which not only reassured the bridging lender but also gave the couple confidence in their post-renovation plans.
Throughout the process, we provided hands-on support, explaining how borrowing for renovations impacted their overall loan-to-value ratio and ensuring they understood the repayment timeline. Our detailed guidance covered every term, cost breakdown, and timeline, giving the clients full clarity on their financial commitments.
The Outcome
With our expert support, the couple secured the bridging loan in time to meet the 28-day auction deadline. Renovations were completed within six months, and we promptly arranged their long-term residential mortgage, allowing them to repay the bridging loan without delays.
The Costs
Our clients borrowed £145k (net) against a £200k property value, which took their loan-to-value to just shy of 80% after interest and fees.
Due to the high LTV, their rate was fairly high at 1% per month.
Having repaid after six months, the total they paid in interest was £11,230, which added to their other costs such as legals and admin fees, came to just shy of £15,000 – roughly 7.5% of the loan value.
If you’re planning to buy a property at auction or need short-term finance for a time-sensitive purchase, Bridging Finance is here to help. Our expert team will guide you through every step of the process, ensuring you have the right financial solution in place.