Obtaining a loan for a client’s IHT bill

What was the situation?

We were approached by a client requiring a loan to pay off an inheritance tax (IHT) bill, so that their solicitor could apply for probate and the refinance to take full ownership into their name.

The property in question was an income generating Buy-to-Let (BTL) property owned by their recently deceased father. The property itself was tenanted, but as it fell within the Estate, it was liable to IHT alongside other assets in the Estate. The client was looking to obtain a £100,000 loan to cover the IHT and associated fees.

What was the issue?

Typically, individuals can apply for finance on a property once probate has been granted. However, since the client could not apply for probate until the IHT was paid, we were stuck in a catch-22 situation. We tried to obtain a bridging loan on the property, however, we faced the challenges of obtaining this as the property did not technically belong to the client.

What was the process?

Due to our extensive network of non-property related lenders, we were able to secure a probate loan against the value of the assets in the estate. This is quite a rare occurrence and requires expert advice due to it’s acute specifications. Only a handful of lenders operate in this space but LDN Finance are proud to be able to access them.

We had to proceed delicately and ensure that all executors and the acting solicitor were on the same page. Furthermore, with interest on the outstanding IHT amount compounding, we had to work quickly to ensure this did not continue to build unnecessarily.

What was the solution?

We were able to successfully secure a loan that covered the full IHT liability and costs, partnering with our specialist lender. The loan was set up over an 18 month period, but can be repaid at any point. Furthermore, we were able to structure the loan on a “roll up” basis meaning that the monthly payments were added on to the net loan, to protect cash flow. We were able to negotiate that the facility also has no exit fees. This means it can be redeemed once the BTL exit loan in the clients name was able to be set up.

Once completed the client was over the moon. They were extremely grateful that we’d been able to find a solution when alternative brokers said it was not something that could be done. We look forward to a long-lasting relationship moving forward.

Need some help in securing specialist property finance? Our experts are on hand to assist. Call 020 3903 9875 to speak to an adviser, or use our online contact form.