Bridging the Deposit Gap on an Unmortgageable Probate Property

The client

Our client was an experienced landlord looking to expand into short-term holiday letting. They had identified a two-bedroom coastal cottage being sold through an estate agent as a probate sale, priced at £250,000, that they intended to refurbish and run as a furnished holiday let.

The property had been empty for some time and was marketed as cash buyers only, its kitchen and bathroom stripped out and in poor repair. It could not be bought with a standard mortgage in its current state, so bridging finance was the only realistic route to completion.

The objective

Buy the cottage using short-term finance, carry out the works needed to make it lettable and mortgageable, and refinance onto a holiday let mortgage that would repay the bridge.

Probate sales often attract interest precisely because the condition keeps mainstream buyers away, so being able to move as a funded buyer was an advantage. The client’s central question was a practical one: how much cash would they actually need to find on day one, given that lenders advertise bridging at up to 75 percent of value?

The complication: the headline loan is not the cash advanced

It is easy to assume that a 75 percent bridge on a £250,000 purchase means finding a 25 percent deposit of £62,500.

That is not how bridging works.

The 75 percent is the ‘gross loan’, the headline figure. Fees and interest are deducted from it at completion, so the net advance that reaches the solicitor is lower, and the real cash deposit is the difference between the purchase price and that net advance.

On this case the numbers worked out as follows, on a nine-month term:

So although the loan was quoted at 75 percent, the true cash deposit was roughly 33 percent of the price, not 25 percent.

The gap of nearly £19,000 between the assumed £62,500 and the actual £81,657 is exactly the sort of shortfall that derails a purchase at the last minute if it is not planned for. Working back from the net figure, rather than the headline LTV, is the single most important step in structuring a bridge correctly.

Learn more: The 75% Trap: Why the Bridging Loan You Are Quoted Is Not the Money You Receive

The options assessment

We looked at the deposit requirement two ways, so the client could make an informed choice about how to fund the purchase.

The client had free equity in another unencumbered property. That meant a genuine choice: fund the full £81,657 in cash, or bring the second property in as additional security so the lender could assess the deal across both.

Cross-charging can reduce or remove the cash deposit entirely, because the lender’s position stays conservative when measured across everything it holds. On this occasion the client preferred to keep the second property clear and fund the deposit in cash, having confirmed the true figure well ahead of completion.

The important point is that the decision was made with the real number in front of them, not the headline one.

Related reading: Bridging Loans and Deposits: A Practical Guide

The steps we took

Step 1 – We established the exact cash the client needed to have in hand by working back from the net advance, not the advertised LTV, and confirmed it against the fees and retained interest for the chosen term.

Step 2 – We sized the gross bridge so that, once fees and interest were stripped out, the net advance combined with the client’s deposit met the purchase price with a sensible margin.

Step 3 – We set out the cross-charging option in full so the client could weigh a nil or reduced cash deposit against keeping their second property unencumbered.

Step 4 – We agreed the exit before the bridge completed, securing a holiday let mortgage in principle so the refinance was evidenced from the outset rather than left to chance.

Step 5 – We scoped the refurbishment against the holiday let lender’s criteria, so the works would deliver a property that met normal lending requirements and let the refinance proceed on completion of the build.

Why the holiday let exit was agreed upfront

Every bridge stands or falls on its exit, the concrete plan for repaying the loan and its retained interest by the end of the term.

Here the exit was a refinance onto a holiday let mortgage once the cottage was refurbished, lettable and meeting normal lending criteria. Because that exit is a specialist product rather than a standard residential remortgage, it was important to line it up as early as possible rather than assume it would be available at the end of the term.

Agreeing the holiday let mortgage in principle upfront did three things.

It confirmed that a lender was willing to take the finished property on holiday let terms, so the exit was realistic before the client committed. It clarified the lender’s criteria on the finished cottage, including its expected letting income and condition, which shaped the refurbishment scope. And it removed the risk of reaching the end of the bridge term with no refinance in place, which is where short-term borrowing becomes expensive and stressful.

The bridge funded the purchase and works; the holiday let mortgage, agreed in principle from the start, repaid it.

Why this was the right route

A standard mortgage was never an option: the cottage was unmortgageable in its condition, which is precisely why the estate agent marketed the probate sale to cash buyers and priced it accordingly.

Bridging funded a purchase that no mainstream lender would touch, and the refurbishment turned it into security a holiday let lender would accept. The structure only worked because the true deposit was identified and funded on day one, and because the specialist exit was evidenced before completion rather than hoped for at the end.

Drake identified and arranged both the bridge and the holiday let refinance directly.