The Ask
Our broker introduced a married couple who had secured planning permission to build a new detached home on the substantial plot of land surrounding their existing property. Mr has worked as a self-employed builder for 25 years and had a clear plan. He wanted to construct the property, move in on completion, split the title and sell the existing residence to repay the loan.
The clients needed to acquire a small plot of land from a neighbouring owner to ensure the existing property would retain a suitably sized rear garden once the titles were separated.
They required a swift completion, as they wished to start construction as soon as possible to take advantage of the spring and summer months, with the intention of occupying the new property before year-end.
The Challenge
The day-one advance had several jobs to do at once: redeem the existing £139,000 first charge on the property, fund the purchase of the neighbouring land and release enough capital to get the build moving
Layered on top of that, because the product was regulated, strict conditions needed to be in place around the exit strategy and the sale of the borrowers’ main residence.
The Fix
We issued fully credit-backed terms on the same day the enquiry was received and all professionals (the valuer, monitoring surveyor and both the borrower and neighbouring land vendor’s solicitors) were instructed on the same day.
Costs had risen since we first approved the case, and the existing property had come in slightly below the original valuation and both needed to be worked through before we could sanction the final loan amount.
In the end, we delivered a £418,000 regulated self-build development finance facility with a maximum facility of £479,000, priced at 1.14% per month with interest rolled up for the full 12-month term.
The day-one advance of £222,000 was sized to clear the existing charge, complete the land acquisition and get the project underway. Three further drawdowns of £57,000 each are available as the build progresses, each released against a satisfactory MS report confirming works on site. A fixed-price construction contract was required to provide cost certainty throughout.
To protect both parties, we also built in a condition requiring the existing residence to be placed on the market no later than month six, with pre-commencement planning conditions discharged and a new-build warranty and building regulations sign-off instructed before the loan completed.
The Benefit
The borrowers could build on their own land without needing to source an external site or sell up before they were ready. Including the neighbouring plot acquisition within the same facility meant their existing home stayed a fully marketable asset (rear garden intact, value preserved) when the time came to sell.
Rolled-up interest and staged drawdowns kept the structure simple throughout the term. A day-one LTV of 43% and an end LTGDV of 35% against a £1,375,000 valuation left plenty of equity headroom, and the sale of the existing property gives a clean, straightforward exit.
If your client needs a regulated development loan, get in touch with the Masthaven Finance team today – we’re ready when you are.
