Our client had recently purchased a property for £3m. They obtained planning permission to demolish the property and build a new 22,000 sq ft home with a GDV of £10m.
We secured a 55% GDV loan of £5.5m at an annual rate of 3% over BoE base with a 1.5% arrangement fee. The deal had no exit fees, nor the requirement for collateral warranties or cost overrun guarantees.
Our client operated a successful business with a high turnover and profit.
Their build was scheduled to take up to 24 months.
The client planned to fund the build by withdrawing directors’ loans from his company. As these loans would be taxable after 12 months the client wished to release the maximum amount on Day 1 and withdraw the build funds in multiple tranches to reduce his tax liability.
Most private banks that could offer competitive rates for this type of deal would require collateral warranties and cost overrun guarantees of 10-20% of he required funds to be held on deposit. This effectively doubled the cash required on Day 1 and therefore the client’s tax bill. In addition, many lenders would only allow 3 or 4 stages drawdowns.
We approached the private banking arm of a subsidiary of a major UK bank. This division had a small market share of private banking sector and was not known as one of the main HNW lenders. However, we knew that their self-build proposition was market leading.
The client’s build is underway with completion scheduled for next year. Typically, the banks charged 4.5% over BoE base for a self-build mortgage. We were able to negotiate reduced rate of 3% over base for the client. In addition, the bank agreed to 12 staged drawdowns. Overall, the deal will save the client over £200,000.
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