Editor's note: This brief was summarised by The Property AI Newsroom from a report by PropertyWire. Read the original article for full details.
Bridging Lender Enables Below-Market Buy-to-Let Acquisition
Somo, a bridging lender, has completed a second charge loan that enabled a borrower to acquire a buy-to-let property valued at £500,000 for £350,000, while also clearing six months of mortgage arrears. The deal involved a seller relocating overseas who required a quick sale and accepted a discounted price to clear their mortgage and fund their move.
The borrower, who had accumulated mortgage arrears while caring for an elderly relative, lacked liquid funds and was unable to access conventional financing due to an adverse credit position. Although the borrower had returned to work and resumed payments, the outstanding arrears remained a barrier to mainstream lending.
Somo structured a second charge against the borrower’s main residence, lending against the property’s independently confirmed market value of £500,000 rather than the discounted purchase price. This released enough capital to clear the arrears and complete the purchase. The lender attributed the price reduction to the seller’s personal circumstances, not to any issues with the property itself.
Following the transaction, the borrower is current with payments and the property is generating rental income. A long-term buy-to-let refinance is in progress to replace the short-term bridging facility with a conventional mortgage product.
The deal highlights the role of bridging finance in enabling property acquisitions where timing constraints and credit histories prevent conventional mortgage approvals. The borrower secured immediate equity of £150,000, based on the difference between the purchase price and the market valuation. Three months after completion, the borrower has maintained payment schedules and is progressing towards standard buy-to-let refinancing.
This case reflects broader trends in the buy-to-let sector, where investors continue to seek opportunities despite tightening lending criteria, and specialist finance providers are increasingly facilitating transactions outside mainstream lending parameters.
Source: PropertyWire