Finance for short leases - by Tomer Aboody

Monday, 11 April 2016
An increasing number of people are tapping into bridging finance to extend short leases on properties and maximise value.

Following the financial crisis, property owners and investors began to look for a broader pool of alternative liquidity, and this has led to growing awareness of bridging finance, which has become more popular and mainstream over the years since the crash.

A bridging loan can give leaseholders crucial access to finance when they are looking to extend a lease and improve the value of property, preventing them from having to sell at a heavily discounted price.

Extending a lease is also important when looking to sell a property as it opens up the selling process to a wider group of buyers. Banks struggle to lend on properties with leases of fewer than 65 years, so a property with a long lease can be attractive to both cash and mortgage buyers.

MTF was recently approached by a client who was looking to raise funds to extend a lease on an existing property in central London and put down a deposit on an additional investment asset.

The client had struggled to get a loan from a number of other lenders as there was only seven years left on the lease.  

MTF (www.mt-finance.com) provided a £650,000, 12-month bridging loan, based on an open market value of £1 million. The process to extend the lease then commenced and the client was able to purchase a longer lease. 

With a longer lease in place, the client was able to secure a long-term buy-to-let mortgage as well as purchase the additional investment flat.