The Situation

Our client was an experienced property developer who was set to complete the development of a block of flats in South London with a GDV of £3.8m. The property would consist of 8 units with an expected rental income of £10,650 per month.

The client was looking to raise a £1.8m loan to repay a £1.1m development facility and raise a further £700k towards the development of a new block flats on the adjacent land. The client ideally wanted the funds released on the completion of the property.

The Solution

We were able to secure a bespoke development loan product from the commercial arm of a high street bank. Following a successful credit paper and business plan, the lender was happy to offer a hybrid of their Commercial Loans and Retail Buy to Let products.

The Process

One of the main issues that the client faced was that typically the commercial arms of major banks can only offer investment loans when the units are fully tenanted. In addition, the size of a commercial investment loan is usually determined by the net rental income of the property after tax and expenses. This would limit the maximum loan to just under £1.4m.

Specialist Buy to Let lenders could, in theory, offer the full loan required on their Buy to Let (BTL) products as they would consider the gross rental income of the property. However, many specialist BTL lenders cannot lend to fund property development as it is considered “capital raising for business purposes”.

In addition, many banks would have concerns over their exposure within the “block” of flats as all the units were held on individual leasehold titles. Typically, the BTL banks would only be able to lend on 25% of the units within the block.

“Following a successful credit paper and business plan, the lender was happy to offfer a hybrid of their Commercial Loans and Retail Buy-to-Let Products.”

Brian O’Neill


The Outcome

We secured the full £1.8m on a 3-year fixed rate of 3.39% secured against the freehold of the building.

We negotiated a reduced fee of 1.25% (from 1.5%). The bank released the funds on the completion of the development (subject to a condition that the units were let within 4 months).

Furthermore, the bank was willing to stage the loan drawdowns over 6 months in £100k increments if required (a feature usually reserved for development finance).

The client is delighted with the product secured. The adjacent property is now complete, and we are working together on a new large-scale project.

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Specialist Mortgage Solutions Ltd
29 Park Circus
G3 6AP

T: 0345 873 1234
F: 0141 354 7941