Bridging loan secures a bargain barn conversion

United Trust Bank’s Bridging Division were approached by a couple to fund the acquisition of what would eventually be their new home, a partially completed barn conversion.

Although the barn was habitable, some works had not yet been finished which would enable Building Control to provide a completion certificate and it was therefore not yet mortgageable. However, the borrowers had negotiated a purchase price at a discount of 15% to the valuation due to the conversion having some important works remaining and they were keen to seize the opportunity of acquiring the barn at a very good price.

The security for the loan was a second charge over the borrowers’ existing residence and a first charge over the barn (70% LTV based on value, 73% LTV based on purchase price). The exit for the loan would come from the sale of their existing home and a new mortgage on the barn once it was completed. The borrowers were able to evidence an income sufficient to secure the mortgage they needed once building control sign off had be received.

To ensure the borrowers had a viable exit strategy, we needed to understand the nature and cost of the works required at the barn in order to satisfy Building Control. We requested and received a schedule of outstanding requirements from the local authority building inspector to comply with building regulations together with quotations from contractors who would carry out the works. We considered these to be fairly minor works and subsequently agreed to provide the borrowers with a facility which would finance the purchase of the barn and also cover the required works plus a reasonable contingency for unforeseen expenditure which we held back within the facility in the event that it was needed.

The purchase has now been completed, and the completion works are well underway.