Bridging Loan To Fund Extension While Awaiting Tax Free Pension Drawdown
Our client’s property extension was on hold due to a lack of funds – their only option was to wait for a tax-free pension lump sum withdrawal to finish the project.
While they were stuck between funding, they came to us for assistance in resolving their situation through alternative means.
The Scenario
Our clients, husband and wife, had begun work on an extension to their property, but work had come to a standstill due to a lack of funds.
Because this was their home, they were keen to finish the work and move on with their daily lives.
They needed £300k to finish the extension project – but the only source of funds available to them was to draw down from the wife’s pension.
But the problem lay in the timing. She was yet to turn 55, meaning she couldn’t yet withdraw from her pension.
Although she was within a year of turning 55, and her 25% tax free cash would more than cover their extension costs, the clients were left in an awkward interim period; trapped between funds with an unfinished project disrupting their daily home life.
The Solution
Thankfully, there was a solution – a bridging loan, designed exactly for these situations, to “bridge the gap” of an interim period.
Our broker suggested they take out a bridge loan for the total sum they needed – £300k – to complete their extension as soon as possible.
Because bridge loans are a type of short-term lending, the term is usually 12 months.
This was the perfect amount of time for our clients. The wife would turn 55 within the year and be able to repay the loan in full with her 25% tax free lump sum.
Bridging loans also don’t need to be repaid monthly like a standard mortgage. So, our clients didn’t need to worry about keeping up with monthly repayments in the meantime.
Even the interest on their bridging loan was rolled up to be repaid at the end of the term, which would be in 12 months when their tax free cash payment had come through.
Through our network of lenders, our broker had quick access to the perfect lender to facilitate this kind of loan, and our clients were quickly able to get back on track with their extension project and focus on their future.
Simon Mullins
Finance Broker CeMAP
Cardiff
0117 959 5094
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As a specialist bridging adviser at Clifton Private Finance, I can take a holistic view of your situation and find the right finance solution for you. Book a free telephone consultation with me at a time to suit you.
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