Looking to build, renovate or extend?

You can’t miss the vast amount of building work going on locally.  In the main, it is by large property developers/builders, but we are receiving enquiries for those privately looking to build their own dream home or renovate and extend their existing properties.   This can also include knocking down the property and building a new one in the same location.  These are normally called Self Build Mortgages or Development Projects.

If you are considering these, have a chat with a local architect first to see if your plans are realistic possibilities. They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!  Lenders then may look to lend funds on a stage payment basis. Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the building inspector, and often the lenders own valuer, then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a reasonable deposit, especially at outset to demonstrate your own commitment. 

For extensions and renovations, it may well depend on the size of the work and what funds are required.  If you are altering the property substantially, rebuilding etc, you will tend to find that only specialist lenders will take these on and in some instances, these may be on a short-term basis.

Development Finance and Bridging Finance (also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction.  The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged, and so on.

Beware though, these lenders will need certainty on the exit route (how will they get their money back?) and with this type of lending and associated fees, it can be more expensive than a normal mortgage. Therefore it makes sense to exhaust all other possible options available to you before going down this route.

Complex scenarios are common in the mortgage market.

The high street lenders tend to only deal with pretty straight forward scenarios.  So, you will need to fit their standard credit score requirements, meet their standard income multiples and, in the main, simply be easy to deal with.  However, we all know that not everyone fits this ‘ideal client’ picture.

Complex scenarios are on the increase.  We had one recently where the clients had built a number of properties but could not sell them for the desired price, siting Brexit as a major factor in this.  Having financed the build with development funding, this can be quite expensive if you run over the agreed timescales.  In addition, this company was running at a loss for this project, as all the building costs had been put through the accounts without the counterbalance of the properties selling to recoup funds.   Therefore, this was not a case many lenders would look at!  However, we found a lender who was willing to assist due to the fact that the clients had previously completed many projects like this, had a number of shareholders and, as they were converting the properties in to Buy to Lets, this would be a long-term venture.   All in all, the clients interest rate changed from over 10% on the development finance, to less than 5% on the buy to let rates.  They also managed to recoup their funds and rent out the properties. 

These are just some of the benefits of using an independent mortgage brokerage and especially if they are ‘whole of market’ and have the ability to deal with any lender and are not restricted to a small panel of lenders.

Other examples include applicants with no credit: too much credit: a desire to pay up front or add additional security in the form of another property thus increasing their ability to borrow more.

AToM has a vast number of lenders on its Complex Prime panel already looking at these types of difficult scenarios. These lenders may not be household names, but you’ll probably find they are extremely helpful and will look at most scenarios, manually, with no credit scoring and have an appetite to lend! Most importantly, their interest rates are mostly very competitive too!

Self Build, refurbishment or development? There are plenty of options..

As the local area continues to become a virtual ‘new homes exhibition’, there are a number of lenders also assisting customers with more private projects such as development, self-build, or if you just want to upgrade your existing property by way of refurbishment. 

On a self-build, the customer normally buys the land and the lender will issue the funds to build, on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a valuer will review and advise the lender of progress and to enable the release of payments.  You will tend to find the lender will lend on the Gross Development Value (the end value).

On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved. They will almost always require a schedule of works – extension plans, kitchen, bathroom, etc. 

The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.  Seek out a local architect to assist you with plans and costs and always make sure you set out accurate budgets from the outset.

Lenders will cater for all types of scenarios (dependant on the exact type of works required!).  Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done! 

Have you heard of the Tipton Building Society?  What about the Saffron, Harpenden, Principality, Dudley, Furness, Shepshed, or the Stafford Railway Building Societies?  Not necessarily household names, but we are seeing these names and a lot more like them launching innovative products.  Not always looking for huge volumes but looking to fill gaps in the market and this should be applauded.  

A good broker will, in most cases, have a relationship with these types of lenders, understand their requirements and ensure all the correct information is submitted from day one.  There really is no better time to utilise the expertise and staffing levels they can provide for you in what’s becoming an over informed and more recently, highly competitive market place.

Lot's of building work happening!

There is a lot of building work going on locally.  In the main, it is by large property developers/builders, but we are receiving enquiries for those privately looking to build their own dream home or renovate and extend their existing properties.   This can also include knocking down the property and building a new one in the same location.  These are normally called Self Build Mortgages or Development Projects. 

If you are considering these, have a chat with a local architect first to see if your plans are realistic possibilities. They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!  Lenders then may look to lend funds on a stage payment basis. Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the buildings inspector, and often the lenders own valuer, then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a reasonable deposit, especially at outset to demonstrate your own commitment.  

For extensions and renovations, it may well depend on the size of the work and what funds are required.  If you are altering the property substantially, rebuilding etc, you will tend to find that only specialist lenders will take these on and in some instances, these may be on a short term basis.

Development Finance and Bridging Finance (now also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction.  The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged, and so on.

Beware though, these lenders will need certainty on the exit route (how will they get their money back?) and with this type of lending and associated fees, it can be more expensive than a normal mortgage. Therefore it makes sense to exhaust all other channels first!