In complicated transactions where time is of the essence bridging loans are often the way to go, but expertise in the sector is essential for success as a recent case involving a client buying a property in France proves
The problem was that the friend’s financial affairs were complicated by some tax planning factors that affected the net profit he could prove on his accounts.
He was highly geared and most French banks have low debt to income allowance ratios. Also, they would not take the rental income from his buy-to-let property into consideration.
After meeting him to discuss his situation, I was able to place his mortgage with an offshore private bank.
The completion date was set for the Friday but on the Tuesday evening the bank discovered that the client’s notary had un-dertaken his work on the basis that the client was a cash buyer rather than a purchaser requiring a mortgage.
In the UK this would not be a big deal but in France it is. With only three days to go, we were told it would take two weeks to redo the legal work. We were also told if the client did not complete in time he would lose his de-posit and incur legal costs of more than £100,000.
I explained to him that I was confident I could arrange a second charge bridging loan secured against his UK main residence and although this was not a cheap option, it would allow him to avoid losing the property and his £100,000.
Initially, he was sceptical that the finance could be arranged in time.
So on the Wednesday morning, my challenge was to raise £350,000 in just over 48 hours, as the client’s money had to be with the seller’s notary in France by 1pm on the Friday.
There are more than 60 bridging lenders in the UK – a potential minefield if you don’t know what you are doing.
After a few phone calls, I secured access to the senior underwriter of one bridging lender and the firm agreed to work directly with me.
I asked the underwriter to find a surveyor who would carry out the survey on the client’s UK property within 24 hours and get comparables and a survey report to the len-der in time to meet the deadline.
As the client’s property was located in the countryside and had outbuildings, the valuation would not be straightforward.
I then asked the underwriter to check the title of the UK property to see if the first charge lender had to give permission for a second charge to be issued and unfortunately, it turned out this was the case.
The client’s solicitor had been told it could take five days to get permission so I phoned my contact at the bank and asked him to hurry this through, which he did.
My attitude throughout was that failure was not an option.
Of course, bridging finance is never a cheap solution but in this case it was the only one. And it again confirmed the importance of using a bridging expert. If you are not one, don’t gamble with your clients’ money – call an expert.