Looking for ideas. Ran my own company for 20 years but shut up shop a couple of years ago in order to buy and renovate 3 houses, in order to help my 3 girls onto the property ladder. I have funds, but think it would be better to borrow some money in order to build my new house. ( Rather than run the risk of going skint. I have found that because i have no income, i can't get any sort of normal borrowing. Ie; self build mortgage etc, and if i want some money, it is going to have to be on a commercial basis. The cost of commercial borrowing at the moment seems horrific ! I seem to be looking at about 25% per annum on any money.  I own land outright that is worth about £750k and my end value will be about £1.5 million. I have no debt anywhere... Any smart ideas of how i might be able to borrow some funds for say 2 years max without having my arms and legs ripped off ? As usual, thanks in advance folks.

How much do you need to borrow finance the build?  On completion, how will you service or repay the loan?

 

I do spec developments and often have to put in the land plus a bit and the lender will put up the build costs and accrued interest.  I use the sale proceeds to repay the loan.

 

Often looking at 5% over base, 2% arrangement and 2% exit fees, plus valuation, legal fees and drawdown fees.

Hi Mr Punter thanks for the reply. To be comfortable i would look to borrow £250k. At the end i could look to either sell (Prob would as i have no real need for the finished house) or i could repay either some, of the borrowing from my own funds, and get a mortgage for the remainder. I do have an interest in a new company, so within a couple of years i should start to be able to get an income. Frankly, i doubt i will stay. I just don't have the need for 4 beds 4 bath, and an annex with a bed and a bath. I got an offer for £300k for 12 months. Working out the total cost it was going to be £75k.

£75k seems really steep.  It is just a matter of shopping around.  Sometimes a broker can get a better deal than you could get yourself.

 

You will only pay interest on the amount you draw down but the commercial lenders want a valuation for each one at £1,000.  Estimated costs could be:

 

Interest @ rate 8.5% so say £25,000, arrangement / broker fee 3% £9,000, valuation fee £1,600,  legal fees £1,900, title insurance £900, drawdowns x 3 £3,000.

 

So I make that £41,400.  It is all a bit of a fee fest.

I am taking commercial finance for my upcoming build starting in April. I tried the mortgage route (all kinds)  but lenders are really picky at the moment and underwriters dont like self build. I intend to sell my current house to pay for the build, so need bridging finance. I shopped around quite a bit and found a lot of sharks out there, many tried to push me the unregulated route so they could fleece me with hidden fees, and the commission rates being charged were scandalous. In the end I got a recommendation from a developer for a company he uses a lot because they are easy to work with and take a reasonable approach to timing etc. What seems to be standard are the 2% entry and 1% exit fees and the interest rate for me is high at 0.95% per month, but there are no drawdown fees, and my broker fee is not a percentage but a fixed £1500. And the broker will likely get a cut of the entry fee in addition. Legal fees are steep at 0.3% of the loan. But as said earlier you only pay interest on what you have drawn down, and all fees can be wrapped into the loan. I calculate my total fees will be around 10% , assuming a level drawdown over the 12 month life of the loan. By the way. I understand regulated loans are restricted to a term no more than 12 months. This method of finance means time is money, so I changed my build route to main contractor. If you take the DIY route you need time on your side which you wont have with this kind of finance, and in any case the lender will probably want to see a reputable builder in charge of the build.

I have just organised bridging finance with Shawbrook.  1.5% arrangement fee, £895 survey, 0.5% per month.  I think it is 12 month maximum but we are using them as a stop gap as we need the money quickly and Barclays will take an age to finalise the long term mortgage.

Offset would be ideal. Shame the days of self cert are long gone

12 hours ago, Dave Jones said:

Offset would be ideal. Shame the days of self cert are long gone

Tell me about it. I had £250k offset for several years. Cost me nothing untill i used it. The good old days.