Busy Bank Holiday Weekend for the RFL Team

Restore Finance were approached in January 2018 to discuss potentially refinancing a new clients existing refurbishment loan onto a developers exit loan. The client was also talking to another broker about refinancing onto a Buy to Let Mortgage.

Pete knew the existing lender and knew what they could charge if the clients loan went into default. Being a 12-month loan, the lender could charge 21% on the first day of default plus a further 3% for that month. On a loan of £231k this equated to £55k, which would take the debt to £286k immediately on day 1 of default. With a valuation of £385k this would take the LTV to over 74% with a further 3% being added in each month of default. This would quickly erode the client’s equity and profit, fundamentally making refinancing even more difficult. The RFL team explained this to the client so that they were fully aware of the default situation. However, the client opted to go down the BTL route early February.

Late afternoon of Thursday 29th March, the day before Good Friday, the client left a message to say that the BTL wouldn’t complete in time and that they had to complete on a refinance by the 6th April to avoid the extreme default penalties. This gave the Restore Team 4 working days to secure a refinance.

During the course of the Easter Bank Holiday Weekend, RFL contacted a lender, who they knew had the ability to perform in such challenging circumstances. Terms were agreed with the client and discussions were held with the lenders solicitor and their valuer so that on Tuesday morning, legals and the valuation were fully instructed and their solicitor was acting on a dual representation basis. On Wednesday the valuation was received and the legal paperwork completed. The legal docs were signed on Thursday and completion took place on the Friday saving the client considerable funds.

Molly Stott from Restore Finance says:

“This is an example of how important it is to ensure that your exit is in place, well in advance of your loan term ending. Also to see what the default terms are with the lender that you are about to enter into a financial agreement with, as this case study demonstrates the extreme default penalties some lenders can charge.”

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