Rob Elmes is a consultant at Savills Private Finance
“The client’s situation is reasonably complicated because of the amount he wants to borrow and his intention to convert the property into five flats.
Most lenders have an issue lending on a property that doesn’t have any rental income for a period of time. The conversion into flats could take a long time, particularly as there doesn’t seem to be planning permission and no guarantee this would be granted.
The client could approach a commercial lender, although the loan-to-value (LTV) may be too high for many.
Alternatively, he could try a private bank for a bespoke product. The lender will insist a surveyor confirms the value of the property and its likely value once converted. It will also want to know whether he has experience of similar developments, an exit strategy, what his timeframe is and cost of conversion.
If these questions can be answered satisfactorily, typically the rate would be between 1.5-2 per cent above Base Rate, plus fees.”
Rod Murdison is proprietor of Murdison & Browning
“Very few banks will lend on a speculative development at 80 per cent, but the following approach could work.
Through one of BuildLoan’s development finance lenders, the client could put down a 25 per cent deposit using the 20 per cent he already has, plus the money he was going to use for the internal alterations to make up the other 5 per cent.
The building could then be purchased and 100 per cent of the cost of development to convert the building into five luxury flats could be released in arrears as the work is carried out.
However, the BuildLoan development finance will only be short-term – up to 12 months – so once the work is completed, I would recommend approaching Capital Home Loans, which is willing to lend up to 80 per cent LTV up to £3 million at competitive interest rates, with the mortgage costs being covered by the rental on the flats.
Trevor Child is head of marketing for CHL Mortgages
“Obtaining a mortgage on properties with this high a price tag used to be a problem, until a number of lenders decided to target this area of the market, introducing a higher lending limit on product ranges.
The buy-to-let market represents a growing opportunity for brokers and borrowers, and, as a result, lenders have adjusted their product specifications to appeal to a greater number of potential borrowers.
As part of the CHL range, the higher limit applies up to 80 per cent LTV and is designed to appeal to the growing number of landlords looking to invest in higher value buy-to-let assets. With a landlord deposit of 20 per cent, the deal will allow properties worth up to £3.75 million to be purchased. The £3 million limit applies to the entire buy-to-let range including the 4.49 per cent two-year fixed rate with 115 per cent rental cover based on the pay rate.”
