SSAS Bridging to Term: A Case Study

SSAS Bridging to Term: Securing Time-Sensitive Deals

Speed is often the difference between securing a great commercial property deal and losing it to a better-prepared buyer. Standard SSAS mortgage applications typically take 8-14 weeks from application to completion — which is often too slow for distressed, probate, or auction property sales. In these situations, bridging finance can bridge the gap: a fast, short-term loan that completes quickly and is then refinanced onto a longer-term SSAS mortgage.

This case study explores exactly this scenario — an SSAS that used bridging finance to purchase a commercial property in six weeks, then refinanced to a 15-year interest-only term mortgage.

The Opportunity: A Distressed Sale

A chartered accountancy practice with a two-member SSAS received a call from their commercial agent about a distressed sale. A regional distribution company had entered administration, and the administrator needed to sell a 6,000 sq ft warehouse unit within eight weeks to maximise recovery for creditors. The asking price was £480,000 — approximately 12% below the RICS estimated market value of £545,000.

The SSAS holds £310,000 in assets (primarily cash and listed investments). At 50% LTV on the purchase price, the required equity contribution is £240,000 — leaving only £70,000 in liquid scheme assets after the equity is deployed. A lender must be comfortable with this post-purchase liquidity position.

The challenge: a standard SSAS mortgage will take at least 10-12 weeks to arrange. The administrator needs completion within eight weeks maximum.

The Solution: SSAS-Compatible Bridging Finance

Not all bridging lenders can lend to pension scheme trustees. But a small number of specialist bridging providers are comfortable with SSAS trust structures — they understand the requirements and can move quickly when the deal stacks up.

"Bridging to term is one of the most powerful tools available to SSAS trustees who want to compete with cash buyers. The key is having a credible exit strategy — lenders need to know exactly how the bridge will be repaid, and in an SSAS context that almost always means refinancing to a specialist term lender." — Matt Lenzie

The trustees instruct a specialist broker who identifies two bridging lenders willing to lend to SSAS trustees. The terms offered:

• Bridging Lender A: £240,000 at 0.85% per month (10.2% annualised), 12-month term, first charge security
• Bridging Lender B: £240,000 at 0.90% per month (10.8% annualised), 9-month term, first charge security

Lender A is selected. The total monthly bridging cost is £2,040 in interest — expensive by comparison to a long-term mortgage, but justified by the property discount of approximately £65,000.

Timeline: Completion in Six Weeks

Week 1: Bridging application submitted with scheme documents, property details, and exit strategy (refinance to term mortgage).
Week 2: Desktop valuation confirmed. Scheme documentation reviewed. Indicative offer issued.
Week 3: RICS valuation completed (£545,000 open market value). Environmental and structural surveys commissioned.
Week 4: Surveys complete. Satisfactory — no significant issues. Formal offer issued. Legal conveyancing commenced.
Week 5: Title investigation complete. Searches clear. Draft completion statement agreed.
Week 6: Completion. Property transfers to SSAS trustees. Bridging loan drawn down.

The SSAS acquires the warehouse for £480,000, immediately gaining approximately £65,000 in unrealised equity over the purchase price.

The Bridge Period: Preparing the Term Refinance

During the bridging period, the trustees begin the SSAS term mortgage application in parallel. They have 12 months before the bridge must be repaid — but ideally want to refinance within 4-6 months to limit bridging interest costs.

The term mortgage application targets a £272,500 loan (50% LTV on the £545,000 RICS value) — higher than the bridging loan because it is based on the higher open market value rather than the distressed purchase price.

While the term application is in progress, the trustees negotiate a lease for the warehouse. A logistics company takes a 10-year FRI lease at £42,000 per year — consistent with market rent confirmed by the surveyor and providing strong income coverage for the term mortgage application.

Term Mortgage Application and Offer

With the lease in place and rental income of £42,000 per year confirmed, the term mortgage application is strong:

• Proposed loan: £272,500 at 6.5% interest-only over 15 years
• Annual interest: £17,713
• Interest coverage ratio: 2.37x (above most lenders' minimum of 1.5x)
• LTV: 50% of RICS value
• Scheme assets post-completion: approximately £112,500 (liquid assets remaining)

A formal term mortgage offer is received at month 4 of the bridge period. Completion of the term refinance occurs at month 5, repaying the bridge in full and reducing the monthly interest cost from £2,040 (bridge) to £1,476 (term) — a saving of £564 per month.

Financial Outcome: The Numbers

Total bridging interest paid (5 months): £10,200
Discount achieved on purchase: £65,000
Net benefit of using bridging finance (discount minus bridge cost): £54,800

Ongoing annual position on the term mortgage:

• Annual rental income: £42,000
• Annual mortgage interest: £17,713
• Net property income: £24,287

The SSAS now holds a warehouse worth £545,000 (RICS) against a mortgage of £272,500 — an immediate equity position of £272,500 in a single asset, all within the tax-free pension wrapper.

Risks and Mitigants

Bridging to term is not without risk:

• Exit risk: If the term mortgage cannot be arranged, the bridge must be repaid from another source. Always confirm term finance is achievable before committing to a bridge.
• Cost risk: If the refinance takes longer than expected, bridging interest accumulates. Build a buffer of at least 3 months into your bridging term.
• Valuation risk: If the term lender's valuation comes in lower than expected, the available loan amount decreases. The SSAS must have fallback liquidity to cover any shortfall.

For more on how SSAS schemes access commercial property, read our guide to SSAS property finance or our warehouse acquisition case study.

Key Takeaways

• SSAS-compatible bridging finance allows trustees to compete with cash buyers
• The exit strategy (term refinance) must be confirmed before bridging is committed
• Distressed property discounts can significantly outweigh bridging interest costs
• The term mortgage should be applied for in parallel with the bridge, not after completion
• Specialist brokers are essential — few lenders offer bridging or term mortgages to pension scheme trustees

Need to Move Quickly?

If you have identified a time-sensitive commercial property opportunity for your SSAS, our team has the relationships and experience to structure a bridging-to-term solution quickly. Contact us today — time is usually of the essence in these situations.