The case in brief
- Client: UK national
- Property type: Commercial convert into Residential
- Property value: £3.25m
- Loan Amount: 100% of development cost + £1.125m
- LTV: 85%
Investing in a commercial property to convert to residential can be a challenge, especially when a competitive mortgage rate is required to ensure viability. The intricacies of factoring both a purchase price and development cost into the equation can be problematic. A competitive mortgage rate for such a transaction can be difficult to obtain on the high street. In this example, our client was looking to convert a commercial property into flats.
Our client
Our client was a UK investor, predominantly experienced in the buy-to-let mortgage market. This property was their first foray into property development, so finding a competitive mortgage lender with competitive mortgage rates was imperative.
The property was originally a commercial office unit based in Essex, and the client wished to repurpose the building into 10 individual flats. The property was approved as a permitted development and therefore no planning permission was required.
The client did not want to invest an extensive initial deposit into the venture, and so was keen on a mortgage lender who would be willing to contribute a significant percentage towards both the purchase price and the development cost.
Our solution
In order to obtain a satisfactory conclusion for the client, we sourced a competitive mortgage lender, with competitive mortgage interest rates, in order to ensure that the development was financially attractive.
We ultimately secured a mortgage deal with a challenger bank who was able to offer 85% loan to value against a predicted Gross Development Value of £3.25 million.
The mortgage amount was made up of a combination of 100% of the development costs and £1.125 million towards the purchase price, which meant that the client only required an initial mortgage deposit of £375,000.
As an added bonus to the client, they were able to access their mortgage funds just 8 weeks after their initial contact with Articus.
Property development can be a complex and often financially challenging venture, with commercial viability and future potential yield high on the agenda for prospective lenders. This is particularly difficult when the investor is new to property development. Using an experienced broker such as Articus Finance can provide you with a route into private lenders, who may be more prepared to be flexible on lending terms and loan to value mortgage ratio.
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