Residential
Property Loan
Lenders
look for certain criteria in order to lend in
these difficult times for the building industry.
That would include being able to service the
loan, securitisation of the debt and history.
Ideally a builder or property building company
should have a good past track record that a
potential lender can see in order to feel that
a development would be a lesser risk. That is
demonstrated with accounts indicating past trading.
The
client will have
to provide a deposit against the land normally
up to 50%. A loan to value (LTV) of around 60%
is possible however that would be reflected
in a higher interest rate for borrowing. The
same will apply for the build cost though this
could include roll up of interest costs and
professional fees.
The
build will probably be asked to pay the legal
costs of the lender along with a valuation and
regular site visits from a quantity surveyor
(QS) who will sign off certain works as stages
are finished in order to release the next amount
of funding. There can also be a entrance cost
and a redemption penalty.
The
lender will want to see evidence of the planning
permission along with a staged costing breakdown
provided for the build costs. Ideally the builder
will be looking to build the houses quickly
in order to sell and get away from the high
monthly interest charges. As high street bank
are reluctant to lend on these types of deasl
other specialist lenders will charge a higher
rate to provide property development finance.
Many
builders are looking at timber frame construction
to overcome this problem as it can be installed
quicker that brick work and is not reliant on
the weather so much. The past few summers have
been very bad for builders and rain can greatly
impede progress. Which will lead to an increase
in costs. Good situation would be to try and
sell some of the homes before their are finished.
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