Scenario:
After months of designing, our client approached us to obtain finance to fund the build of their new home. The current property had planning approved to be demolished and replaced with a new 5 bedroom, detached house. Funds were required to pay off the existing mortgage and pay for the building costs which were estimated to be £700,000. The property, in its current condition, was estimated to be worth £900,000. The value of the new property once built was expected to be at least £2 million.
Challenges:
As there was an existing loan of £500,000 on the property already, the initial lending amount had to repay this mortgage and provide surplus funds to start the works. Self-build lenders will normally offer 80% of the land value on day 1 and 80% of the build cost. In this case, we also required a lender who could offer 5x income which is more than the standard 4.5x self-build lenders generally lend.
Solution:
If you are unfamiliar with self-build mortgages, this type of funding can be very complex as lenders will ask for lots of information regarding the project in addition to strict affordability requirements. Fortunately for our client, we have dealt with many large self-build projects and found a lender who could provide all of the funding required to complete our clients dream home. The funds were to be drawn down in 5 stages throughout the build and the first 2 years of the loan were offered on an interest only basis to help with cash flow.
Key figures:
GDV: £2,000,000
Loan amount: £1.2 million
LTV: 60%
Repayment type: Interest only
Product type: 2 year variable
Interest only: 4.19%