Specialist brokerage SPF Short Term Finance has revealed that it has seen a surge in residential self-build projects and spoke to Development Finance Today about how they can be financed…

Calum Kerr, Head of Self-Build and Development Funding at SPF has a wealth of experience financing clients who are looking to purchase a property with the intention of gaining planning permission for its demolition and rebuild.

Recently, Calum has handled a number of enquiries where the client has used a standard residential mortgage or bridging finance to fund the purchase, and then used self-build finance once planning permission being granted.

More relaxed planning rules means that these projects can be less risky than first thought, but financing them can be difficult, with Calum pointing out that: “The majority of self-build high street lenders will only agree to the funding once planning permission has been granted.”

There can also be unforeseen cost implications. Some self-build lenders may be unwilling to lend the required amount due to conservative loan-to-value (LTV) restrictions.

SPF explained that while the residential lender may appear reasonable value on associated costs, there will be another set of arrangement, legal and valuation fees to follow.

Loans could also be placed on immediate demand of repayment if the residential lender has uncovered the client’s intention to knock down the property, which will leave the client in a difficult position.

SPF has recently helped several clients on pre-planning purchase deals, including a 14,000 sq. ft country mansion knock down and rebuild with an end value of circa £10m. SPF was able to achieve a loan size of 100% of the build costs.

The brokerage also arranged a remortgage and build costs for a 2,500 sq. ft. home in Kent undergoing a knock down and rebuild valued at £800,000 upon completion.

SPF also arranged a remortgage on the building of a Huf Haus property in Weybridge and was able to achieve 100% of build costs in line with the Huf Haus terms of payment.

SPF told DFT that Calum Kerr has also been appointed by Huf Haus as their adviser on mortgage funding in the UK.