We were approached via a broker to assist his clients in purchasing a new primary residence in Kent.

In a ‘classic bridge’ scenario where the borrower seeks to purchase a new property before the sale of an existing one, the bridging lender will usually look to take charges over both properties in order to raise the amount required for the purchase. This is usually a first charge of the property being purchased and a second charge over the property being sold.

However, in this case, the clients had an existing residence in South London which they were not intending to sell.

The borrowers were raising a high street mortgage, had a large deposit available from their own liquid funds and were seeking a bridging loan to fund the balance of the purchase price.

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The bridging loan was therefore secured as a second charge behind the mainstream mortgage.

The borrowers had originally intended to raise the balance of the purchase funds against an unencumbered investment property in Ireland, but they had been let down at the last minute by the lender.

As a result, they were under significant time pressure to complete the purchase of their new residential property.

The borrowers decided to sell the Irish property and a bridging loan was a perfect solution to their funding problem as it still allowed them to raise the required funds against the property until a sale was achieved.

In our lending assessment, we will always seek to understand the transaction in its entirety, with our primary concerns being:

– who the client is
– why they require the bridging loan
– what security is being provided
– how the loan will be repaid
– and whether they have alternative repayment routes.

This deal made sense on many levels.

We felt comfortable with the security property being purchased. The borrowers were able to evidence significant income and the reason for the bridging loan was sound.

Despite the recent economic downturn in Ireland, our investigations led us to feel comfortable that the investment property was saleable within the term of the bridging loan.

Although we didn’t request a valuation of the investment property, we were provided with one that had recently been carried out for the intended lender which helped with our assessment of value. We were also comfortable that given the financial status of the borrowers they were not solely reliant on a single exit route to repay the bridging loan.

Under normal circumstances, a second charge loan secured against a primary residence would be a Consumer Credit Association (CCA) regulated loan. While we have a consumer credit licence and are able to provide such loans, this loan was CCA-exempt as the borrower was able to demonstrate that he could be classified as a high-net-worth individual in line with CCA exemption rules.

What made this loan particularly out of the ordinary was that the broker had to get the consent of the high street lender to allow a second charge to be registered behind them, notwithstanding the fact that their first charge would only be registered on completion.

This resulted in a multitude of unexpected problems which the broker was eventually able to resolve to enable the transaction to complete for the benefit of his clients.

The broker, Dave Mant, from 4U Commercial Mortgages, said: “Our real problem in obtaining the necessary consent was co-ordinating between the pre-completions team and the completions department of the first charge lender.

“We had several attempts at doing this and eventually, after speaking to one of the team leaders, they understood what we were trying to achieve.

“The lender had to be reassured that the borrowers had an exit from the bridging loan, but as we could demonstrate that the borrowers were selling a property in Ireland, common sense prevailed.”