Raising £1.2m against unencumbered holiday let to purchase and build dream home
The situation?
I was approached by two entrepreneurial clients who owned two properties, their main residence and a holiday let. They stumbled upon a derelict property in their local village, but it needed a lot of refurbishment to make it livable. After falling in love with the spot, their aim was to knock it down and build a new property on the land.
To begin with, the clients wanted to raise capital to buy the property outright. They had just built their holiday let which was unencumbered, and therefore planned to refinance the holiday let to raise cash to purchase the new house. The clients wanted to borrow £1.2m.
The first complexity the clients had was they already had a large mortgage on their main residence with £800,000 outstanding, so weren’t able to raise capital from that. Also, they didn’t want to raise capital against the new property they were purchasing because they planned to knock it down once planning had been approved and so knew this would mean having to obtain more expensive development finance.
The second complexity was the holiday let didn’t have a building warranty. This can cause an issue for lenders because the property was built less than 10 years ago, therefore most lenders would require it to have a building warranty. To help lenders get comfortable with this asset, we put the clients in touch with a retrospective warranty provider who was able to provide it.
The solution?
The clients intention was that once planning had been obtained and the property built, they would sell their current main residence to pay off that mortgage and pay off the mortgage on their holiday let property also.
Once all paperwork had been evidenced and provided to the lender, I was able to agree an interest only facility with a private bank and no early repayment charges. This offered the clients full flexibility to redeem debt as and when the new property was constructed and main residence sold.