Offering development finance for a broker’s client

A broker came to us with an enquiry on behalf of their client – a shopkeeper who wanted a development loan to build a bungalow in which she would then work and reside. She wanted to sell her existing shop and concentrate her efforts on building her new bungalow.

After carrying out our standard affordability check on the client and finding that everything was in order, we were happy to assist the broker in making her dream a reality.

Details of the Development Loan & How It Worked

The gross loan amount was £150,600, with an overall loan-to-value (LTV) ratio of 31%.

Establishing the Exit Strategy

Like all lenders, we make sure the borrower has a viable exit strategy in place before we agree to lend to them.

The client chose to exit the loan through the sale of her shop, which was on the same title as her in-progress bungalow. In plain terms, this meant that her development loan for the bungalow build was secured against her shop and the build in progress.

Releasing the Funds in Stages

As is standard practice, we released the funds to the client in stages and in accordance with her build timescale, rather than releasing all of the funds at once. The initial release was £70,300.

The client chose to retain the interest, and as the loan was released to her in stages this ensured that she only paid interest on the funds she actually drew.

Completing the Build Project

The valuation report in this case was slightly more complex than usual, because the security provided by the borrower was initially a commercial property and not a residential property. However, this did not affect the speed at which we were able to instruct the surveyors, and as a result the client received the funds she needed on time, and was able to finish her build without any unnecessary delays.