For most ultra and high-net-worth individuals, selling property is often cumbersome and frustrating. The property sale itself isn’t generally the issue. Instead, it’s how long it takes to sell real estate which is usually the most exasperating aspect of disposing of property. This exasperation is often particularly amplified in high-value property sales because of the time such properties typically spend on the market before they are sold. Property chains, lengthy home loan application processes for potential buyers, and the amount of time needed to carry out surveys and valuations can add layer upon layer of frustration for HNWI sellers.
HNWIs will usually only look to sell real estate when they have plans that necessitate disposing of a property to carry out new plans or meet new goals. These objectives can be broad – it might be something as simple as upsizing to accommodate a growing family or buying a new primary residence. Alternatively, disposing of property can also be part of a larger plan, especially for individuals with an extensive property portfolio. They will often want to free up liquidity to make investments, buy other investment property, buy an asset that has come onto the market…and anything in between.
Using Bridging Finance to Take Equity out of a Property
Bridging finance in these situations is often a near-perfect solution. Individuals can release equity tied up in their property by using a loan secured against the property. The property sale proceeds are generally used to repay the bridging finance when the real estate is sold, making the exit very straightforward.
Used in these scenarios, bridging finance will help your clients access capital quickly – often in as little as 1-2 weeks. The underwriting process for bridging finance will focus predominantly on the elements that matter in the deal. This makes the process is quick and won’t require the lender to ask exhaustive questions that have no real bearing on the deal or influence their ability to lend.
What to Think About
For most high-value property on the market to sell (especially in prime locations like London or the Channel Islands), a sale is a question of when, not if. As a result, many HNWI feel very comfortable with opting for a bridging loan – a sale is simply a waiting game and their exit is easily assured.
If your client would like to release equity from the property before it is sold, the property will need to be independently valued, and Tenn’s underwriting team will also look carefully both at the value and how easily homes have sold in the area, as well as how long it has taken them to sell. As long as your client is selling at a reasonable price (i.e., their property isn’t on the market for significantly more than it’s worth) and property sales for similar properties in the area have seen strong demand and have moved off the market in a reasonable timeframe, a bridging loan will be a very real possibility.
How much Equity can my Client Release From a Property?
How much equity your client wants to release from their property will depend on their plans. Some advisors approach us on behalf of clients who wish to take out a small portion of equity to execute a specific goal. In other scenarios, you may have a client that wants to borrow as much as possible against a property that’s already on the market to sell. Tenn will be able to entertain either scenario. Because every deal is hand-built, we don’t deal in absolutes and therefore can’t provide you with a specific LTV. What we can lend will depend on your client’s financial background, plans, and the collateral they will put forward. That said, we can lend upwards of £1 million, and for the right borrower, we are prepared to offer very significant finance.
My Client has a is Complex or Owns Property Through a Complex Structure
Tenn regularly works with clients and advisors looking to release equity from property held through complex structures, or individuals considered complex themselves.
We will always focus on the core elements of the deal. However, your client’s property ownership structure, income structure, nationality or country of residence won’t impede our ability to lend, as long as their finances and collateral are strong.
We understand that for clients at the top end of the market, a ‘plain vanilla’ financing solution won’t always be practical. You will be looking for a lender that can deliver a finance package that suits your client, rather than obliging your client to adopt a finance package that suits us. Consider it done.
If you have a client who would like to release equity from a property that is already on the market to sell, or if you would like to understand more about how bridging finance works in such scenarios, get in touch. We will reach out to you to give you more information and explain more about the opportunities bridging finance presents.