Project Background
Our retired clients had found their dream home through a modern auction and successfully secured it with an offer of £635,000.
The purchase came with a strict 60-day completion deadline, meaning they couldn't afford to wait for the sale of their existing home to complete.
The good news was that their existing home had already sold subject to contract for £430,000 and was completely mortgage-free. The challenge was that the sale wouldn't complete in time to fund the purchase.
Although the clients had significant pension savings available, withdrawing a large lump sum would have pushed a substantial portion of the funds into the additional rate tax bracket, creating an unnecessary tax liability and reducing the value of their retirement pot.
Challenge
On paper, this looked like a straightforward bridging case. In reality, the finance needed to achieve far more than simply getting the purchase over the line.
The solution had to:
The clients were also generating a higher rate of return from their pension investments than the interest payable on the bridging loan, meaning withdrawing additional funds simply didn't make financial sense.
Solution
Rather than asking the clients to withdraw a larger amount from their pension, we structured a £390,000 net (£430,000 gross) bridging loan, secured against their existing mortgage-free property.
By increasing the loan by approximately £90,000, the clients avoided making a larger taxable pension withdrawal, resulting in an estimated £36,000 tax saving.
Just as importantly, we carefully structured the facility so that the gross balance after 12 months remained below the expected sale price of their existing property.
This meant that when the property sale completed, the bridge could be repaid in full, allowing the clients to move into their new home completely mortgage-free without needing to draw down further pension funds in the future.
Keeping more money invested within the pension also meant those funds could continue generating returns at a rate higher than the cost of the bridging finance, improving the clients' overall financial position.
Outcome
The clients completed their auction purchase within the required timescales and secured their dream home without compromising their long-term financial plans.
By taking a strategic approach to the finance, they were able to:
This case perfectly demonstrates that bridging finance isn't always just about speed. When structured correctly, it can form part of a wider financial strategy, helping clients reduce tax, maximise investment returns and achieve significantly better long-term outcomes.
