Securing a Mortgage for a Jersey Resident

• Borrower: Jersey resident and property developer
• Property: Existing land and buildings acquired for development
• Property value: £1.25M
• Loan amount: £1M
• LTV: 80%
• Interest rate: 7.50%
• Term: 18 months
• Interest structure: Rolled up for the full term
• Arrangement and exit fees: None

Property developers can face particular funding challenges when acquiring a site that requires planning consent before development can begin. Enness was approached by a Jersey-based property developer looking to acquire an existing site and subsequently develop the property once planning consent had been secured.

The client’s income was derived from property development and, while they had liquid cash available, they did not have significant additional assets that could be used as security. The proposed project therefore required a high loan to value (LTV) facility that would allow the client to preserve some of their available cash to fund the planning and development process.

The property had a value of approximately £1.25M and the client required £1M of acquisition finance, representing an 80% LTV. The intention was to use the initial facility to acquire the site and provide sufficient time to secure the necessary planning consent before moving onto a development finance structure.

Jersey has a relatively small development finance market, meaning that the number of potential lenders can be limited. Development finance can also involve significant arrangement and exit fees, making the overall cost of funding an important consideration for developers working within a defined project budget.

Enness therefore explored its specialist lender network to identify an alternative source of acquisition finance. A private lender was prepared to provide the required £1M facility for an initial term of 18 months, giving the client time to progress the planning application.

The structure also provided greater flexibility than a conventional development facility. There were no arrangement or exit fees, while Enness negotiated for the interest to be rolled up for the full term. This meant the client did not need to make monthly interest payments during the initial acquisition and planning period, helping preserve available cash for the project.

The resulting facility was secured at 7.50% interest and represented 80% LTV against the £1.25M property value. The lender also secured first refusal on the subsequent development finance once planning consent had been obtained and a development appraisal prepared.

This provided the client with a clear potential funding pathway from acquisition through to the next stage of the project, subject to planning, underwriting and the lender’s assessment of the proposed development.

The case demonstrates how Jersey mortgage finance can be structured around the requirements of a property developer where planning consent is still required. Private lenders may offer greater flexibility around LTV, fees and interest structures, although the overall cost and risks of private finance should always be carefully considered.

For developers looking to acquire land or existing buildings ahead of a planned project, specialist property development finance expertise can help identify potential funding solutions for the acquisition and subsequent development, subject to lender criteria and the viability of the proposed project.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, valuation, property suitability, planning, development viability and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances. Planning, development and tax matters should be considered with appropriately qualified professional advisers.

Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. Property development and land finance can involve significant risks, including planning delays or refusal, changes in property values, construction costs, market conditions and the ability to refinance or repay borrowing. Rolled-up interest increases the amount owed over the term, and borrowers should ensure that a realistic repayment and exit strategy is in place.