Bridging loan for lease extension - yes/no?

j_jaxx

I'm extending my lease (it's 79 years) and intended to pay the £16,500 premium when the flat sold. Due to lockdown it hasn't. The four-month limit on the agreement is up, so I need to raise the money (freeholder won't extend the time). My bank won't loan for a lease extension. Halifax won't remortgage as it's a short-term loan not a remortgage. They also wouldn't extend it for "home improvements" as I went self-employed in January so don't have two years accounts. Plus my freelance earnings are not guaranteed (and since lockdown they're low). I haven't tried other banks as I'm sure they won't, for same reasons. Is a bridging loan the only way forward? Been advised by several local estate agents that selling with 79-year lease (price dropped accordingly) is unlikely as it's a first-time buyer's flat and this puts them off. Plus locally is a slow market, I've reduced from £435k to £400k and still only one viewing since restrictions lifted, will have to drop again as freeholder planning major works of multiple £000s, not covered by the sinking fund (whole other story...). Head been spinning for months about this. Any advice or other options gratefully received. How do I find a trustworthy broker to do a bridging loan through? I have no idea what to look for or how to know if they're reliable and fairly priced.

[Deleted User]

j_jaxx said:

I'm extending my lease (it's 79 years) and intended to pay the £16,500 premium when the flat sold. Due to lockdown it hasn't. The four-month limit on the agreement is up, so I need to raise the money (freeholder won't extend the time). My bank won't loan for a lease extension. Halifax won't remortgage as it's a short-term loan not a remortgage. They also wouldn't extend it for "home improvements" as I went self-employed in January so don't have two years accounts. Plus my freelance earnings are not guaranteed (and since lockdown they're low). I haven't tried other banks as I'm sure they won't, for same reasons. Is a bridging loan the only way forward? Been advised by several local estate agents that selling with 79-year lease (price dropped accordingly) is unlikely as it's a first-time buyer's flat and this puts them off. Plus locally is a slow market, I've reduced from £435k to £400k and still only one viewing since restrictions lifted, will have to drop again as freeholder planning major works of multiple £000s, not covered by the sinking fund (whole other story...). Head been spinning for months about this. Any advice or other options gratefully received. How do I find a trustworthy broker to do a bridging loan through? I have no idea what to look for or how to know if they're reliable and fairly priced.

Bridging loans are expensive and for £16,500 I'd be looking at a person loan rather than bridging finance which will be a lot more expensive by the time you've factored in all the fees. In fact I'm not sure you can even get bridging loans for such a small amount.

An alternative is to do the lease extension as part of the sale.

https://www.lease-advice.org/faq/i-am-considering-buying-a-flat-and-i-would-like-to-extend-the-lease-i-know-that-i-cannot-do-this-for-two-years-from-the-date-of-purchase-might-there-be-any-issues-with-the-renewal-or-the-cost-of-the/

j_jaxx

Thanks Lover_of_Lycra. As mentioned, looks like I can't get a personal loan as not been self-employed for two years. When you say as part of the sale, do you mean drop the price and sell it on the basis the new buyer can extend it? Five estate agents plus my lawyer and my surveyor have advised against that as most first-time buyers will be totally put off by that. Also my understanding is that they have to have lived in a property for two years before they can extend, by which time the agreed premium will have expired and freeholder might ask for even more money. I might have misunderstood though.

j_jaxx

Just saw the link in your message. Thank you.

[Deleted User]

Halifax might not be willing to give you a personal loan but some lender out there might be and even if the rate is crap (not pay day loan crap though) you’ll hopefully repay the loan very early so it won’t matter. 

Would the government's bounce back loan scheme lend you the money you need? I realise this isn’t strictly what these loans are for but it might be worth looking into. 

tonyh66

£16.5k off £400k is nothing, I think your getting bad advice. A FTB looking at a £400k house/flat won't be put off if the lease is only 79 years its longer than their lifetime, the pending work by the freeholder may have an effect on the sale, and will also have to be factored into te selling price.

j_jaxx

Thanks Tony. That's what friends have said - that it wouldn't have put them off as a FTB. All the estate agents say it will put FTBs off. Maybe they've lost sales because of it and just want an easy life/easy sale. Tricky when they're pretty much saying they won't take the flat on unless the lease is extended. 

j_jaxx

Thanks @Lover_of_Lycra. Which lenders do you think are worth approaching? Who might lend when I'm newly self-employed. Loan would be repaid early when flat sells. 

DCFC79

j_jaxx said:

Thanks @Lover_of_Lycra. Which lenders do you think are worth approaching? Who might lend when I'm newly self-employed. Loan would be repaid early when flat sells. 

A broker might be of use here.

j_jaxx

Thanks @DCFC79. One broker thought they could help (min. £25k loan, more than I need but OK) at 1% interest. But the lenders he uses are currently only lending min. £50k and at 1.5-2% interest. Not sure how to find another broker and know they're reputable.

foxy-stoat

Have you got any credit cards with money transfer option?  You can do the balance transfer shuffle until you clear it.