New Below-Market-Value Bridge Offers Up to 90% of Purchase Price
A new bridging proposition could reduce the cash investors need when buying at a genuine discount—provided the valuation supports the market value and the exit remains credible.
MS Lending Group has launched a below-market-value bridging product intended for investors acquiring property at a genuine discount. The structure may allow part of that discount to operate as effective equity, reducing the immediate cash contribution required at completion.
Higher Purchase-Price Leverage for Genuine Discounted Acquisitions
For residential purchases, the lender will consider advances of up to 90% of the purchase price, subject to a maximum of 70% loan-to-value against the open-market value.
For commercial purchases, it will consider up to 80% of the purchase price, capped at 60% of the property’s 180-day value.
The proposition is designed for transactions where the agreed price represents a genuine and independently supportable discount, rather than a reduction based only on an asking price or informal estimate.
Why Conventional Bridging Structures Can Undervalue a Discounted Purchase
Many lenders calculate leverage against the lower of the purchase price or valuation. This protects the lender, but it can also mean that an investor purchasing well below market value must still contribute a substantial deposit despite creating equity immediately.
Where the discount is real and the valuation supports a higher market value, a below-market-value facility may allow the lender to advance more against the agreed purchase price without exceeding its maximum loan-to-value limit.
Transactions That May Benefit From This Structure
Residential property purchased at auction.
Property acquired from a receiver or insolvency practitioner.
Distressed or time-sensitive landlord acquisitions.
Probate property requiring a rapid completion.
Commercial assets negotiated below supported value.
Refurbishment opportunities with a clear refinance or sale exit.
How the Discount Could Replace Part of the Bridging Deposit
Consider an investor agreeing to purchase a residential property for £700,000, with an independent valuation supporting a market value of £900,000.
Purchase price: the amount agreed with the seller.
Market value: supported by the independent valuation.
90% of purchase price: the maximum under the purchase-price cap.
Market-value cap: £630,000 against the supported valuation.
On those figures, both calculations produce a maximum loan of £630,000. The client may therefore need around £70,000 before costs, rather than approximately £175,000 under a conventional structure advancing 75% of the purchase price.
The saving is commercially significant, but it depends entirely on the lender accepting the valuation and the transaction satisfying its wider underwriting requirements.
An Asking Price or Agent’s Opinion Does Not Establish Market Value
The main risk is valuation. A previous listing price, informal appraisal or claimed discount does not prove that the property is worth more than the agreed purchase price.
The valuer is likely to consider recent comparable evidence, condition, occupation, title, planning position, local demand and the time required to sell. For commercial assets, the lender may also focus on the more conservative 180-day value.
Recent comparable sales supporting the proposed market value.
The property’s condition and any refurbishment required.
Title, tenancy, planning or legal issues affecting marketability.
Whether the purchase is genuinely arm’s length.
The credibility of the proposed refinance or sale exit.
The borrower’s contribution, experience and source of funds.
Funding Should Be Tested Against More Than One Value
A discounted acquisition review should compare the purchase price, open-market value, 180-day value, refurbishment requirement and expected completed value. These figures can produce materially different loan amounts.
The review should also test the exit under realistic assumptions. A refinance may depend on post-works value, rental coverage and the borrower’s circumstances. A sale exit may depend on achievable pricing and the likely marketing period rather than an optimistic future value.
