Property Title Split and Debt Consolidation

Client Background

The clients are from North Yorkshire. Mr. is self-employed, and Mrs. is employed by the NHS. Due to health issues, Mr. experienced a significant drop in income, which led to financial strain.

The couple had an outstanding mortgage soon to expire, a secured loan, credit card debts, an overdraft and funds required for a new driveway to their annexe. 

The Scenario

The clients sought a bridging loan of £355,000 to consolidate their mortgage, loans, and debts while financing the driveway construction. The annexe, a separate 3-bedroom detached cottage, was expected to be sold for approximately £350,000, which would serve as the primary repayment strategy and a smaller mortgage.

The Challenges

Several challenges made securing the loan urgent:

• Financial distress: The couple faced a substantial deficit in their income due to a drop in Mr’s Income.
• Urgent need for restructuring: Their existing mortgage had a high interest rate, with the mortgage soon to expire.
• Debt burden: Large credit card debts and an overdraft increased financial instability.
• Construction: Funds required to create a separate driveway to the annexe.
• Splitting of the title: A prior legal agreement was required to split the title.

The Solution

A Fast Track Fixed Bridging Loan was secured with the following terms:

• Loan Amount: £355,000
• Term: 12 months
• Interest Roll-Up: No monthly payments required, as interest would be added to the loan
• Lender & Legal Fees: Added to the Loan
• Legals – Dual Representation Legals
• Exit Strategy: Primarily selling the annexe with a small mortgage.

The fixed-rate bridging loan provided certainty of costs, allowing the clients to plan their financial future without concerns about fluctuating interest rates.

Implementation Process

The loan application process was expedited to address their financial constraints. Key steps included:

• Financial Fact-Finding: A detailed financial review was conducted.
• Loan Structuring & Risk Discussion: The clients were advised on risks, including potential delays in selling the annexe and alternative repayment strategies.
• Valuation & Underwriting: The lender conducted a valuation to confirm the annexe’s expected sale value.
• Legal Documentation: Rapid coordination with solicitors ensured efficient handling of the necessary paperwork.
• Loan Approval & Funding: The bridging loan was approved, and funds were released to settle outstanding debts and complete the driveway work with a legal agreement to split the title on the sale of the annexe.

The Outcome

• Debt Consolidation Achieved: The clients cleared their mortgage, credit card debts, overdrafts, and secured loans, stabilising their financial situation.
• Property Sale in Progress: The annexe was listed for sale, with expected proceeds covering loan repayment.
• Financial Relief: Thanks to the interest roll-up feature, the restructuring allowed them to manage finances without immediate repayment pressures.