A developer turned to Mortgages for Business to find the necessary finance for a residential development near Peterborough, after his original lender withdrew support.

Land purchase price: £252,000
Build costs: £509,346
Gross development value: £1,080,000
Off-costs: NIL
Loan facility: £746,000
Loan to value: 70 per cent of GDV
Interest rate: Seven per cent fixed for two years, interest-only
Lender arrangement fee: Two per cent of loan amount (£14,920)
Exit fee: Two per cent of loan amount (£14,920)

The client, a Lincolnshire businessman, recently sold his long-established food business for several millions and was looking to become a full time property developer.

Alongside running his business, the client had also successfully built and sold on a number of residential developments with his father, who owns a building company. He also has four other developments running currently with this project.

The client bought a small brownfield site which had formerly operated as a garage in a village within commuting distance of Peterborough. The land had been cleared ready for construction. The developer had gained planning permission to build nine terraced two-three bed starter homes.

However, the client needed to find a new lender for the development as his usual lender had withdrawn because it didn’t like the fact that the client had sold his food business (which provided the lender with additional security).

When the client bought the land, it had planning permission to build nine three-four bed townhouses. However, after discussing the plans with several local estate agents, he came to the conclusion that the houses weren’t the right sort and might be too expensive for the local market. So, he re-worked the project and went back to the Council seeking permission to build nine two-three bed starter homes with gardens and two parking spaces per house. After the application was approved, the client approached Mortgages for Business for help in finding a new lender.

Because the client had demonstrable experience and was of high net worth, Mortgages for Business found a lender that was willing to lend up to 70 per cent of the Gross Development Value (GDV). The funds will be made available in tranches subject to the sign-off by the quantity surveyor.

Construction began in October 2014 and all nine houses are expected to be completed by spring 2015. Each house is being marketed at £120,000 and some have already sold.