London property purchase secured with £400,000 bridging loan while waiting for planning on an investment property before sale

Finance: £400,000 | Location: Croydon, London

Delays in planning permission are sometimes unavoidable, but when it delays the purchase of a primary residence, it can be a stressful experience that becomes easier to control with suitable funding and guidance.

£400,000 bridging loan of property in Croyden

A couple in London were in a tricky situation when they relied on selling an investment property to fund the purchase of their new home. Unfortunately, the planning decision on that investment property was delayed, and their current property was through to the later stages of the sale process, potentially leaving the couple with nowhere to live. 

It takes an average of 8 weeks to complete a planning application, but with the sale of the property nearing completion, finding a solution was becoming increasingly critical. 

They had explored other avenues to finance the purchase of their new home, but traditional loans were either denied or accompanied by sky-high interest rates. 

They had £40,000 in cash to put towards the purchase but needed a further £400,000 in bridging finance to purchase their new property, to avoid losing their ideal property to another buyer, and avoid moving into a rental property for a fixed period.

The couple needed a £400,000 bridging loan to help purchase their new home while waiting for planning permission to complete. 

The couple wanted to purchase a property worth £440,000. The funding was going to come from the sale of their investment property. But due to the delays in planning, they no longer had all the cash to purchase the property and were at risk of losing the property they wanted to move into.

During the delay, their current primary residence was sold and in the process of completion, which added to the complexity of their situation. With the risk of losing their primary residence prematurely, they were looking for alternative financing options and living arrangements in case the worse to happen.

They contemplated renting a property, but it would have incurred £2,500 in fees and upfront rent and tied them into a 12-month contract, which they did not want to do. 

They wanted to buy a detached house in Addington, and with only 24 sold in Croydon in 2022 between £400-£500k, they needed to find an option to enable them to purchase the property quickly. 

How was the £400,000 bridging loan used to purchase their new property and give them additional time to complete planning and sell their investment?

With our extensive relationships with private investors and family offices, we found a suitable lender to review  this couple's complicated situation and find a solution very quickly.

Once the planning permission on their terraced investment property was granted and the work completed, it was valued at £540k. With nearly 534 terraced houses sold in 2022 in the Croydon area (Data source: HM Land Registry) the demand for this type of property remained high, the sale was looking to be a relatively quick process once the planning was granted. 

Our lender  lent our clients the full £400,000 bridging loan on a 12-month term by placing a lien against their investment property, awaiting planning permission. 

The 12-month term would give the couple enough time to get the planning application accepted, complete relevant works and ready for sale, and allow them to purchase their new home. 

Also, with no early repayment charges, if the planning permission were completed earlier, they could save on a month's interest charges.

A bridging loan in this scenario prevented the couple from losing their perfect home to another buyer in what was a highly competitive market, renting a property or finding alternative accommodation and gave them extra time to plan and complete their investment property. 

The benefits of using a bridging loan to purchase a property when planning permission is delayed

In complex situations like these, bridging loans come into their own. Most traditional high-street lenders prefer vanilla deals and aren’t able to complete complex  funding in very short timescales.

Bridging loans can be beneficial in scenarios like these, especially when planning permission issues exist and prevent and delay other property purchases. They 'bridge the gap' in the finance needed and can be a valuable springboard for investors, developers and residential homeowners. 

One similar scenario could be the following:

Suppose you're planning to purchase a property requiring significant refurbishment, but the planning permission has yet to be granted, you can use a bridging loan to finance the purchase of the property and the initial stages of the refurbishment. Once the planning permission is granted, you can secure a longer-term mortgage to pay off the bridging loan.

Similarly, if you're looking to purchase a property intending to convert it into multiple units, you may need planning permission before starting the work. A bridging loan can give you the funds to purchase the property and start the initial conversion stages, such as clearing the property or preparing architectural drawings until the planning permission is granted.

A bridging loan can provide a flexible and fast financing option to help you bridge the gap until planning permission is granted, allowing you to move forward with your plans. However, it's essential to carefully consider the costs and risks associated with bridging loans, such as higher interest rates and the possibility of default if you cannot secure longer-term financing to repay the loan.

Financial advice from experts on bridging loans 

A bridging loan could offer the financial reassurance needed if you are looking for a solution to a complex situation, especially when you cannot purchase a new property as the sale of your current property has fallen through or is delayed. 

With cash often tied up in property and not easily accessible for many of our clients, a bridging loan, in many instances, can help provide the necessary funding. 

When it comes to bridging loan brokers, we recommend talking to someone experienced in this type of case. Regarding large sums of money and time-sensitive situations, a good bridging loan broker will understand the processes and can quickly guide you through the application process and, financially, get you to where you want to be.

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