Finance for new build while clients still live in their existing property

PARTNER

Michael Frimpong

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THE SCENARIO

Regularly clients come to Enness looking to remortgage their primary residence to fund the building of a new one. At Enness, we take a great deal of care to help clients make the process of moving home as smooth as possible. We are experts at organising bridging finance to facilitate this.

A retiree couple came to me recently via a recommendation from their friends who were impressed with my service. They were looking to begin building a second property on the grounds of their existing residence in Surrey. Planning permission had already been in place for some time, and foundations were laid to keep the planning permission valid. The new build was expected to take 12 months and would likely be valued at £3million upon completion. Their primary residence was also valued at £3million and had no mortgage.

The plan was for the couple to move into the new house upon completion, sell the former residence and split the title into two separate plots. This meant that we would need to organise Bridging finance as the couple’s pension income alone wasn’t enough to cover the projected building costs of £1.35million.

Also, most bridging lenders will only offer a regulated first charge bridging facility for 12 months. This gave no leeway if the building project went over time and would mean that my clients could be faced with refinancing the bridging facility for another 12 months, which would be incredibly expensive if the project overran.

OUR SOLUTION

I knew exactly how to overcome these obstacles, as I have a strong relationship with a particular building society that has very flexible underwriting. This lender has a regulated bridging facility that can be rolled over for two years rather than 12 months.

My clients could access this product as they are considered to be High Net Worth. Their primary residence was unencumbered, and they also owned a buy-to-let property which gave them equity of £350,000. This meant that the lender in question was able to ignore the affordability stress testing that would prevent any other lender from offering this.

The lender was also happy to accept that the repayment of the bridging facility was made from the sale of their first property. My clients were able to fund the £1.35million build costs over three blocks of payment, saving significant interest. I managed to negotiate a rate of 5.99% annually (or 0.49% monthly) over a 2-year term where the interest is rolled up and added to the net borrowing of the build costs.

My clients were delighted with this result as it ensured a smooth process from build to move to sale. At Enness, we put a great deal of emphasis on creating lasting relationships, and I was very pleased to offer great service after being personally recommended by the clients’ friends.