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Categories: Case study | development finance
A landlord approached us about development exit finance, which was needed to refinance a ground-up build they were working on.
They had started work on a development project to build two detached houses, with a view to selling them on completion.
They had taken out development finance to fund this project, but there was still work to do as they approached the end of the term.
At this point, the client had a couple of options to refinance. Either secure an extension to the term with the existing lender, or find a deal elsewhere.
The existing lender had offered for a three-month extension with a 2% fee, but the client was keen to understand if they could get better terms elsewhere with more flexibility, in case 3 months was not enough time to get the works completed and the properties marketed and sold.
Development exit finance is ideal in situations where time pressures leave you in the difficult position of needing more time and borrowing to get a project complete.
The case
Investment route: The investment was made via a limited company.
The properties: Two detached houses.
The borrowing requirement
The client needed borrowing at 75% loan to value, with a flexible timeframe to repay to allow for completion of the build, marketing of the properties through an estate agent and sale of the property to fund the repayment of the loan.
The challenges we overcame
Applying for development exit finance requires a clear exit strategy, which is what all lenders will look for when reviewing applications.
Fortunately, the landlord in this case study had a solid exit strategy in place. The plan for the fully constructed properties was to sell them and repay the construction and loan costs. Of course, marketing and selling a property takes time, so it was important that we could secure a term for the client that gave them flexibility.
However, we were able to quickly find a suitable lender that was happy to provide assistance. The lender we identified offered a suitable deal, with no exit fee and the option for the developer to repay early, if necessary.
What’s more, rather than a “30-day valuation” (i.e. a value based on having to sell a property quickly, which results in a lower estimate), the lending was based on market value, so the client was able to maximise the amount they could borrow.
The solution
Property value: £1,200,000
Gross loan amount: £900,000
Loan to value: 75%
Monthly rate: 0.89%
Term: 12 months
Payment basis: Retained interest
Do you need help securing development exit finance?
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