£400k Bridging finance for London property in probate to aid inheritance tax and property repairs before sale
The customer consulted a broker in this case because they were in a unique circumstance that required a great deal of personal care and compassion.
The client was a young son who had recently experienced the death of his mother. It was a difficult transition for the client because they had spent his entire childhood together in their family home.
Our client had no additional siblings or relatives, and he was handling the administration of his mother's estate on his own.
At the time of his mother's death, there was a tiny outstanding mortgage in his mother's name secured against the home, and the client was still waiting for the estate's probate to be certified.
However, there was an unpaid inheritance tax bill of which 10 percent was due.
The client had no cash or assets to liquidate to satisfy the bill, which had to be paid before the property could be placed into his name. His only choice was to sell the £1,000,000 property, which he couldn't do until it was transferred into his name.
Gary Poulton, Managing Director explains "If a client doesn't have the required capital available to pay the inheritance tax that's due on a large estate - it can be a really tricky situation. Whilst we appreciate the law is there to safeguard the treasury, in many cases the bereaved simply can't draw funds from assets to cover IHT nor can they complete probate without paying the IHT so they're unable to sell the property in question. Thankfully there are options, and bridging finance can help if the lender is comfortable with the risk profile."
He had called many finance brokers to see if he could get a short-term loan to cover the tax payment, which he would repay once the property was in his name and sold.
Every broker he'd approached had turned his down because they couldn't arrange a loan against a house that wasn't legally in his name – and wouldn't be until he'd paid 10 percent of the purchase price.
To make matters even more complicated, the client also had:
- Low income
- No credit score
- Additional personal debts
The Solution
The clients' last hope was to contact a professional bridging lender who in turn talked to us. Together with our expertise, common-sense attitude and flexible lending approach it took less than 2 months to complete on the bridging finance.
We issued a £400k 12-month bridge loan to cover:
- The property's outstanding mortgage from the late mother
- The total inheritance tax bill, the cost of property renovations to be completed prior to its sale, and the client's living expenses for the duration of the loan while the property was being sold
The financing was also set up so that it could be paid out as soon as Probate was granted, allowing them to move quickly.
The loan would be returned when the house was sold, and the 12-month period allowed our client to complete repairs and put the home on the market long enough to realise its full potential worth.
The bridging loan was worth 40% of the property's value (40 percent LTV).
Finally, the loan's interest was rolled up and reimbursed at the end of the term or upon loan redemption, guaranteeing that the client had enough cashflow for the year and didn't have to worry about monthly interest payments.