Development completed with second charge finance

Development completed with second charge finance



When a developer ran out of money mid-project, his broker turned to Mortgages for Business to arrange additional finance to complete the refurbishment of a block of flats .


When a developer ran out of money mid-project, his broker turned to Mortgages for Business to arrange additional finance to complete the refurbishment of a block of flats.

Combined property value: £1,400,000
Loan amount and terms: £538,000
LTV: 38 per cent
Rate: 1.25 per cent pcm
Term: 18 months
Lender arrangement fee: Three per cent

The client, an experienced property developer and residential landlord, was refurbishing a block of flats using development finance sourced through his broker. However, due to unforeseen problems with the structure of the building, the funds were due to run out before the project could be completed.

The developer’s broker had lined up mezzanine finance but approached the deal placement team at Mortgages for Business to see if they could source a better deal, so his client’s profit margins wouldn’t be so dramatically reduced.

It was found that the client owned a number of rental properties, all with buy-to-let mortgages. One in particular had sufficient equity, but the mortgage was on such a historically low Standard Variable Rate, the client was not keen to remortgage.  

Mortgages for Business found a lender that was prepared to offer the necessary funds, securing the loan with a second charge on the property. The terms offered were substantially lower than the mezzanine finance.

Commenting on the deal, David Whittaker, Managing Director of Mortgages for Business, said: “The deal placement team is there to help brokers who can’t immediately access the best financial solution for their clients. In this instance, our knowledge of the market meant that we were able to find a more competitive solution.

“We worked with the lender to negotiate terms and the broker maintained the relationship with his client. Mortgages for Business did not charge the client a broker fee and we split the lender’s commission with the broker.”

 



Leave a comment