Bridging Loan To Purchase Holiday Home Overseas

Bridging loans can provide a flexible solution for those looking to purchase property abroad, especially when traditional mortgage options are unavailable due to cross-border restrictions.

The Scenario

Our client approached us with a dream of purchasing a holiday/retirement home in Southern Spain, and had identified a beautiful 4-bedroom detached villa valued at £350,000.

Keen to snap up the property before losing out to other buyers, they were exploring using a bridging loan to complete the purchase while waiting for their UK residence to sell.

The client owned two properties in the UK:

• Their main residence, valued at £650,000 with a £119,000 mortgage outstanding
• A buy-to-let property valued at £350,000, unencumbered

Their plan was to sell their main UK residence, but they needed a bridging loan to raise capital against their UK properties to facilitate the Spanish purchase in the meantime.

This often means your bridging loan will be at a higher loan-to-value (loan value comes to a higher percentage of the property value). Fortunately, this is offset by the strength of the UK property market – most overseas property markets have a lower average value.

The Solution

Understanding the complexities of cross-border transactions, we knew we needed to approach a regulated lender that would approve international purchases while still offering competitive rates.

When dealing with international transfers, lenders have limited ability to monitor funds due to varying timelines and regulations around the purchase. This means we need to be selective on the lenders we approach.

We secured a bridging loan with the following terms:

• £350,000 capital raised
• 0.68% per month fixed rate
• Interest rolled up
• No drawdowns

To make the transaction more straightforward and decrease the risk to the lender, we also advised the client to instruct their own solicitor.

We also needed to obtain second charge consent from the first charge lender on the client's main residence, which added time to the process. Despite this, securing the loan only took approximately 6 weeks.

This case highlights the importance of working with experienced brokers who understand the intricacies of cross-border transactions.