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The client was looking to buy a new main residence worth over £1 million, which he planned to demolish, building a larger property on the site. However, the client is self-employed, inexperience in property development, and required a high value interest-only mortgage on a stage release basis. Together, these factors made sourcing the funding a challenge.
The client is an entrepreneur and business owner, and is classified as self-employed. He had an offer accepted on a new main residence, and wished to develop it into a larger luxury property. Planning permission was already in place for this, although the client has no previous involvement with a project of this nature. Many lenders would not be happy to take a view on such circumstances.
As the client plans to purchase and then develop the property, he required lending on a stage release basis. (This form of lending is specific to new build projects, where the funding is released at different points throughout the process.) The client wished to borrow the money as and when he needs it, to purchase the property and then pay developers, thus reducing interest costs. This was a challenge, as many lenders will not offer this type of arrangement at all, due to its complexity and time consuming nature.
Additionally, the client needed the funding on an interest-only basis, as during the works he will be renting another property to live in, until the new house is complete. These requirements would be a challenge to meet, due to the high value of the loan and the 100% development funding required.
The client approached largemortgageloans.com to assist them in sourcing the funding. We took the time to fully understand the client’s financial position. We identified that he had a consistent and rising record of income, and a good team of professionals in place to carry out the development project.
We have wide-ranging experience in dealing with clients who have complex circumstances and requirements. Using our strong relationships with a number of private banks, we were able to source a suitable lender. They offer ‘self-build’ finance on a stage release basis to inexperienced developers, as long as they have a suitable team of professionals to carry out the works. This suited the client perfectly.
We presented a full and detailed credit proposal to a lender, which was accepted without the need for assets under management. We negotiated for the client to pay on an interest only basis for the first two years to ease his cash flow whilst they were renting, along with minimal early repayment charges.
The client was happy with the mortgage terms presented, and was able to secure the funding for the purchase and development of his new home.
|Loan amount:||£1,200,000, with £410,000 initially to facilitate the purchase and a further £790,000 on a stage drawdown basis to fully fund the works|
|Rate:||2.70% on the purchase loan and 4.15% on the development loan, both reverting to standard variable rate, currently 4.25%|
|LTV:||46% LTV on purchase funds, 100% LTV on development funds|
|APR:||Overall cost for comparison 4.4% APR representative variable|
|Type:||Repayment but with a 24 month initial interest only period|
|Loan purpose:||Residential purchase and self-build development|
|Lender’s arrangement fee:||1% on purchase funds, 1.5% on development funds|
|Early repayment charges:||£100 for the first 12 months only|
This case study is for information and illustration purposes only. It is not an offer, or suggestion of an offer. Each mortgage case is assessed on an individual basis and there is no guarantee that the solution described here can be repeated in the future.
Please note that this specific deal may not be available to – or suitable for – all customers, dependent on their individual circumstances. The rate quoted may become out of date at short notice and may not be available at the point at which customers enquire about it. This document may not contain all the information needed for customers to make a decision and they should seek advice.
Overall cost for comparison 4.4%APR representative variable based on 25 years at 2.70% and 4.15%. Lender’s arrangement fees of 1% and 1.5% of the loan amount. The actual rate available will depend on your circumstances. Ask for a personalised illustration.
largemortgageloans.com is a trading name of Largemortgageloans.com Ltd. A fee of up to 1.17% of the mortgage amount is payable, of this 25% is payable on application and the remainder on completion, e.g. on a mortgage of £1,000,000 the fee would be £11,700 of which £2,925 would be payable on application. The precise amount will depend on your circumstances.
Your home or property may be repossessed if you do not keep up the repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you re-mortgage.