Navigating the UK property market can be challenging, especially when it comes to purchasing flats with short leases. Short leases, while often significantly discounted in price, can pose barriers to financing and resale value, making them a niche but lucrative investment for savvy property buyers.
To address this challenge, we’re excited to announce the launch of our Lease Extension Bridging Loan, a tailored financial solution designed to help you unlock the potential of short-lease flats. With competitive terms and a focus on the uplifted value of extended leases, this new product opens up a world of opportunities for investors, developers, and homeowners alike.
In this article, we’ll dive into the details of our new loan product, explain its key benefits, and provide practical examples of how it can help you capitalize on the unique opportunities within the UK property market.
What Is a Lease Extension Bridging Loan?
A Lease Extension Bridging Loan is a short-term financing solution specifically designed to help buyers purchase flats with short leases and cover the cost of extending those leases. In the UK, leasehold properties often come with leases of 99, 125, or even 999 years. However, when the remaining lease term falls below 80 years, the property’s value declines sharply, and it becomes harder to obtain conventional financing.
Our Lease Extension Bridging Loan is tailored to this scenario, allowing you to:
- Purchase the property.
- Finance the cost of extending the lease.
- Borrow against the uplifted value after the lease extension is complete.
This makes it an ideal solution for investors and homeowners looking to capitalize on the increased market value of a property after extending its lease.
Key Features of Our Lease Extension Bridging Loan
Here’s what makes our loan stand out:
- Up to 90% of Purchase Price
- Our loan covers up to 90% of the purchase price for the short-lease flat, reducing the upfront capital required.
- Up to 90% of Lease Extension Costs
- We also fund up to 90% of the costs associated with extending the lease, ensuring you have the liquidity to move forward.
- 70% Loan-to-“Extended Value” (LTV)
- The loan is based on 70% of the property’s uplifted value once the lease is extended. This gives you the flexibility to borrow against the future value of the asset.
- Loans up to £1.5 million
- Our product caters to a wide range of properties, with loan amounts available up to £1.5 million.
- Consenting Freeholder Requirement
- A consenting freeholder is required to ensure a smooth lease extension process.
- Flexible Terms
- As a bridging loan, this product is designed to be short-term, giving you time to refinance or sell the property once the lease is extended and its value is uplifted.
Why Short Leases Are a Golden Opportunity
While properties with short leases may seem like a problem to some, they present a golden opportunity for buyers with the right strategy and financing. Here’s why:
- Discounted Purchase Price: Flats with leases under 80 years are often sold at a steep discount because they are harder to sell and finance.
- Significant Value Uplift: Extending the lease can dramatically increase the property’s market value, often by more than the cost of the lease extension itself.
- High Demand for Leasehold Properties: In many UK cities, flats make up a significant portion of the housing stock, and there’s strong demand for well-located properties.
How Our Lease Extension Bridging Loan Works
Let’s break down how this product can be used in a real-world scenario:
Example 1: Investor Buying a Short-Lease Flat in London
- Property: A 2-bedroom flat in London with a remaining lease of 65 years.
- Purchase Price: £300,000 (discounted due to the short lease).
- Lease Extension Cost: £70,000 (to extend the lease by 90 years).
- Uplifted Value: £450,000 (market value after lease extension).
Using our Lease Extension Bridging Loan:
- Loan for Purchase Price: 90% of £300,000 = £270,000.
- Loan for Lease Extension: 90% of £70,000 = £63,000.
- Total Loan Amount: £333,000.
Once the lease is extended, the property’s value increases to £450,000. The investor can refinance based on the new value or sell the property for a potential profit.
Example 2: First-Time Buyer Securing a Bargain
- Property: A flat in Manchester with a 72-year lease.
- Purchase Price: £150,000.
- Lease Extension Cost: £30,000.
- Uplifted Value: £200,000.
With our loan:
- Loan for Purchase Price: 90% of £150,000 = £135,000.
- Loan for Lease Extension: 90% of £30,000 = £27,000.
- Total Loan Amount: £162,000.
After the lease is extended, the buyer can refinance with a traditional mortgage based on the higher market value of £200,000, ensuring a manageable repayment plan.
Benefits of Our Lease Extension Bridging Loan
1. Unlock the Potential of Short-Lease Properties
This product allows you to seize opportunities in the short-lease market, which is often overlooked by traditional buyers and investors.
2. Reduce Upfront Capital Requirements
With up to 90% financing for both the purchase and lease extension, you’ll need significantly less upfront capital to secure a property and extend its lease.
3. Capitalize on Value Uplift
By borrowing based on the property’s uplifted value, you can maximize your return on investment and ensure your loan aligns with the asset’s true potential.
4. Short-Term Flexibility
As a bridging loan, this product gives you the flexibility to refinance or sell the property once the lease extension process is complete.
5. Catered to UK-Specific Challenges
This loan is specifically designed to address the unique challenges of the UK property market, particularly for leasehold properties.
Practical Tips for Using a Lease Extension Bridging Loan
- Work With a Lease Extension Specialist
Extending a lease involves negotiation with the freeholder, a formal valuation process, and legal documentation. Hiring a solicitor and a chartered surveyor experienced in lease extensions will ensure a smoother process. - Understand the Leasehold Reform Act 1993
This legislation governs lease extensions for qualifying properties in the UK. Familiarizing yourself with the rules will help you anticipate costs and timelines. - Calculate the Marriage Value
For properties with less than 80 years remaining on the lease, the freeholder is entitled to 50% of the marriage value—the increase in property value after extending the lease. This is a key cost to factor into your financial planning. - Plan Your Exit Strategy
Whether you intend to refinance or sell the property, have a clear plan in place for repaying the bridging loan within the agreed term. - Maintain Good Communication With the Freeholder
A consenting freeholder is a requirement for this loan. Building a cooperative relationship with the freeholder can expedite the lease extension process.
Why Choose Us To Arrange Your Lease Extension Bridging Loan?
Our team understands the complexities of the UK property market and the challenges faced by investors and buyers dealing with short leases. This product is designed to provide maximum flexibility, competitive terms, and the support you need to make the most of your property investment.
With loans up to £1.5 million and a focus on the uplifted value of extended leases, we’re here to help you unlock opportunities that others might overlook.
Conclusion
The UK’s leasehold market offers unique opportunities for buyers willing to navigate its complexities. Our Lease Extension Bridging Loan is a game-changing product designed to help you purchase short-lease properties, extend their leases, and realize their full market potential.
Whether you’re an investor seeking high returns or a first-time buyer looking to secure a bargain, this loan gives you the financial tools to turn challenges into opportunities.
If you’re ready to take advantage of the benefits of lease extensions and need a tailored financial solution, our team is here to help. Reach out today to learn more about our Lease Extension Bridging Loan and take the first step toward unlocking the potential of short-lease properties.
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