Consolidating 1st & 2nd Charges With a Single Bridging Loan

Loan Amount:
£225,000

Property Value:
£700,000

LTV:
59%

Tidying up a portfolio and consolidating debts can be a good idea in some circumstances. But in practice, doing so can be tricky.

This is especially true where a refinancing strategy involves multiple disparate asset types. A property investor turned to us for support as they attempted to consolidate their debts, and raise funds from residential and commercial assets.

With multiple elements to account for, our underwriter got to work. They had to ensure that the borrower’s unique circumstances worked for our parameters, while making sure the long-term refinancing exit strategy was achievable.

Sector Specific Risks

The commercial property being used within this deal posed potential risk issues. To ensure the business itself was viable, we explored the available verified accounts which showed that while the sector involved could have proven risky, there was no cause for concern with this individual case.

With this addressed, we turned to the exit strategy. It involved the residential and commercial elements coming together at once, which proved difficult to coordinate. This could have limited their options with long-term lenders, but our underwriter jumped on this issue.

We gathered quotes and DIPs from a few external lenders who would be willing to lend to our borrower following our loan even with their unique circumstances. With clear options available, we were able to deliver funding.

New Priorities Could Emerge

Residential properties and commercial assets require different underwriting practices, but we’re likely to see more multi-asset cases come to the forefront over the coming months. With the Renters’ Rights Act on the way, along with various tax changes, many property investors will likely want to reorganise their portfolios.

With costs mounting, there may be a preference to shift away from residential assets, and move toward commercial properties this year.

Fortunately, Market Financial Solutions has a range of refinancing options available for these kinds of plans, and we have plenty of experience with all the market’s various asset classes.

Working on a similar case?

If your client is looking to unlock equity or restructure existing debt within a commercial portfolio, speak to our team to explore your options.

Sense-check a case

FAQs

What kind of commercial properties can Market Financial Solutions deliver finance for?

Our commercial bridging loans can be used for a broad range of asset types. This includes relatively straightforward properties such as offices and shops, through to more complex spaces such as warehouses and care homes. We can also work with mixed-use property portfolios.

What is a capital raise?

In bridging finance, capital raising involves using short-term finance to unlock equity from a property so that those funds can be put towards another investment.

Why would someone want to consolidate their debts?

By consolidating one’s debt, a borrower can simplify the management of their finances, and potentially lower their costs. Also, debt consolidation can allow borrowers to pay off their debts faster, and improve their credit scores.

What kind of documentation would be needed for this kind of deal?

Every deal we underwrite is assessed on its own merits, and so what’s needed will change on a case-by-case basis. However, where commercial properties are involved, we will typically need tax documentation, accounting figures, and source of wealth paperwork.

Why do some lenders consider commercial properties to be higher risk than residential properties?

There are a few reasons why commercial properties can be considered a higher risk from a lender’s perspective. The rents involved will be business-dependant which creates uncertainty, and commercial properties tend to be less liquid than their residential counterparts. There are also potential use-class restrictions involved, and a whole host of sector-specific legislation to factor in. All this can make commercial property challenging to assess and underwrite, and can limit the exit strategies available to borrowers.