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Case Study: Development Finance for a First-Time Investor


Case Study: Development Finance for a First-Time Investor
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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin23 Feb 2021
    

Client Background: Revolution was approached by a client seeking development finance for a self-managed project. Our client had found it challenging to negotiate borrowing rates as a first-time developer looking to construct extensive residential property across two sites.

Property Information: The development site was located in Gillingham, Kent. In total, the project consisted of two locations. Development one included three flats, of which one was a premium penthouse property. Development two was a site with 16 apartments.

Financial Requirements: Our client had considered the development budget and had opted to carry out the project management himself to reduce the overall project budget by 40%.

He was looking for a multi-million-pound development finance loan, with an option to roll up interest to repay through the exit strategy (site resale), rather than need to budget for ongoing interest charges throughout the build.

The Revolution Brokers Solution:

The Revolution Brokers team identified that the primary barrier to borrowing was the factor that the applicant was a first-time developer. We worked closely with our client to draw up detailed plans, predicted sale values and costings to demonstrate the project's stability and the exit strategy's viability.

We negotiated with the identified lender to ensure they were comfortable with the application and paint a detailed picture of the development project.

Following these consultations, the lender was happy to support the loan and made a formal offer to lend, covering the build's full cost on a rolled interest basis.

Property Valuation:

£5.4 million gross development value (on completion)

Total Mortgage Borrowing:

£2.2 million

Loan to GDV Ratio:

53%

Negotiated Interest Rate:

9.5%, rolled interest

Mortgage Term:

18 months

Monthly Payment Value:

£0 - rolled development finance

Arrangement Costs:

2%

Exit Charge:

1%

FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.