A property investor has secured £1,462,500 in bridging finance from SDKA to purchase a three-bedroom apartment in St John’s Wood, using the loan term to pursue a Section 42 lease extension that will expand refinancing options.
The apartment is located in the Yoo Building in one of London’s higher-value postcodes. High ground rent on the property currently restricts the number of buy-to-let lenders willing to offer term mortgages against it.
Lease extension strategy
By serving a Section 42 notice during the bridge term, the borrower can extend the lease and reduce the annual ground rent liability, bringing the property within lending criteria of a wider pool of lenders. The Section 42 process typically takes between three and 12 months to complete.
The deal was arranged by Jack Cuthbert, high-net-worth finance broker at Articus Finance, and completed at 75% loan-to-value on a flat rate of 0.84% per calendar month over 12 months.
“My client’s requirements for the loan were quirky to say the least,” Cuthbert said. “SDKA were excellent; they addressed each point, the entire process was smooth and efficient, and their communication was extremely impressive.”
Kunal Mehta, managing director of SDKA, described the transaction as “bridging finance as a true solutions product, using the money to acquire an in-demand property in a highly sought-after location and then using the term to open up the number of lenders who will provide long-term buy-to-let finance.”
Lender profile
SDKA, founded in 2016, is an unregulated bridging lender operating across England, Wales and Scotland, offering fixed interest rates from 0.84% per calendar month on residential, semi-commercial and commercial properties up to a maximum loan-to-value of 75%.
The case highlights how bridging finance is being used to address ground rent issues that have become more prominent since mortgage lenders tightened criteria on properties with high ground rent charges in recent years.
