Our clients had built a block of 11 flats on land purchased with a development loan. They owned the freehold of the building and held 11 individual leasehold titles on each of the flats. They approached Specialist Mortgages as they were looking to repay their development loan, as well as raise funds for a new project.
The clients needed a loan worth £1.2m to repay their £650k of development finance. They also wished to raise a further £550k for their next project. There are many specialist second tier banks that would consider a new loan, but we were hoping to secure ‘high street’ retail mortgages, which have offered much lower rates and fees to our clients.
“This new deal has enabled our clients to dramatically improve their monthly cash flow and will help to fund future investment property purchases”
As we wanted to secure a high street deal, we faced a few issues. Many lenders will not lend to property developers if the funds will be used to pay for development. In addition, many banks would have concerns over their exposure within a block and would only lend against 2 or 3 of the flats individually. Finally. many lenders would class the flats as ‘new build’ as the properties had been completed within the last 12 months and were being occupied in their current state for the first time. This caused issues based on the criteria surrounding new build properties.
We presented the case to a specialist bank who, although being one of the newer lenders on the market in comparison to their peers, are extremely dynamic in their approach to lending and meeting customer’s needs. On the strength of our application, the banks were prepared to lend the full loan, across all of the flats.
The client’s previous development finance was charged at 1% per month, costing approximately £6,800. The new loan was charged at 3.78% fixed for 2 years, reducing their monthly outgoings by £4,600. Furthermore, they have secured £550k at 3.78% fixed for 2 years, which will save them thousands of pounds per month when compared to bridging finance.
This new deal has enabled our clients to dramatically improve their monthly cash flow and will help to fund future investment property purchases.
