£690k to develop 5-bed home in place of cottage and repay short-term finance

The client: A longstanding client who is a full-time property developer who has been carrying out residential development projects within London for more than a decade.

The project: The client had acquired a small semi-detached cottage on a large plot in a Norfolk village which is particularly popular with tourists and second homeowners. The cottage had been left empty for a number of years and was in a bad state of repair. Realising the profit potential of the site, the client approached the owner of the cottage to which his was attached and suggested that they demolish both properties and replace them with two, separate and much larger homes.

The neighbour agreed and together they submitted and obtained planning permission although they planned to finance and build the properties separately. Our client's property will consist of five bedrooms, three bathrooms and three reception rooms. 

The finance: The client calculated he needed a loan facility of £690,000 which would be sufficient to complete the build of the house and repay an existing bridging loan from a previous project.

We put together a comprehensive proposal for our client which included his income, development experience and full details of the project. We then approached a bank that had lent to the same client in the past. To help assess the application, the bank appointed a senior manager who was familiar with the local area. After some negotiation the bank agreed a facility for 15 months - 12 months to build the house and three months to sell it and repay the loan. Here are the details:

Property value: £470,000 (pre-development)

Build costs: £375,000 + £40,000 fees

Gross development value: £1,150,000

Loan facility: £690,000 (to build and repay an outstanding bridging loan)

LTV: 60% of GDV

Rate: 7.75%

Term: 15 months

Facility fee: 2% of loan amount (£13,800)

Exit fee: 2% (£13,800)

Consultant: David Whittaker, 01732 471601


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