FAQs

A. In general you can borrow up to 70% of the purchase price.  If you have owned and but this depends on the lender, your circumstances and location of the property

A. You will need between 30% to 40% deposit plus enough money to cover associated fees

A. Lenders see the hospitality sector as high risk and will not lend more than 70% loan to value

A. If you have owned and operated a bed and breakfast or hotel in the recent past you would be classed as experienced

A. Yes, any work you have done within the hospitality sector will help your application but you will still be classed as “New to Trade”

A. You would need to ask your current mortgage provider for permission to trade, however, most residential mortgages do not allow you to trade from the property.

Your property would need a change of use so you would need to speak to the Planning Department at your local council which is generally a formality.

A. Call us.  We are happy to discuss your plans and to look at the options available to you

A. The biggest difference with other type of mortgages, such as a residential mortgage, is the type of property for which funding is required; in this case it would be an office, industrial unit or a shop for your business to use. The property might actually be an investment to you, where tenants pay you a rent and in turn you pay the mortgage.

A. For owner-occupied property, you can achieve a 70-75% mortgage. If it is an investment property, the amount you can borrow will be determined by the rental income generated by the investment – this cannot generally exceed 65% of the purchase price.

A. The terms of a loan against a commercial or industrial property vary from lender to lender but as a general rule, the following will apply:

• Up to 80% loan to value for owner occupied
• Up to 60% loan to value for investment
• 5 – 25 year mortgage terms

A. When you have identified a project you would like to take on and have a good idea of the expected purchase costs, build costs and end value.

A. On a short term development project, your finance will not be based on your income. Development finance is based on the feasibility of the project. This will be done by assessing you as a developer and the viability of your project. You will need a proven track record and experience in developing property.

Where you have little or no experience, your lack of experience will be supported by employing relevant professionals – architect, project manager, professional builder etc. A fixed price contract with your builder is advisable. You to be able to show that you have the funds available to support; contribution needed, cash or land owned outright.

A. This really depends on your project but in general if you are:-

Buying a Building Plot

• 30 – 50% of the purchase price
• 100% of build costs
• Total amount borrowed must be below 50-60% of the project end value or GDV.

Buying a Conversion or Renovation

• If you are looking to purchase a conversion or renovation property, the loan amount offered can sometimes be higher than that offered against just a building plot:
• 30-50% of the purchase
• 100% of build costs

Total amount borrowed must be below 50-60% of the project end value or GDV.

A. You will need to have a clear and accurate outline of all costs, before purchasing a project, or commencing building work where the site is already owned.

When borrowing money there are several fees to consider.  These fees will depend on the project being undertaken.

Most fees can be added to the total loan, so in the majority of cases, the costs will come out of profit, rather than your own cash reserve.

Your finance options will generally consist of the following charges:

Arrangement Fee

This fee will be charged as a percentage of the total loan amount you intend to borrow. It can cost anywhere from 1% to 3% and is usually added to your loan at the beginning of your project.

Exit Fees

Depending on your project, this fee will be based on the loan amount, or the end value of your development. You will be charged from 1% of your loan amount or from 1% of your project’s end value dependent on lender.

Interest Charges

Your monthly interest cost will usually be based against the amount of funding released. This will mean that as your build progresses and further funds are released, your monthly payments will increase. In most cases, monthly interest will be added back into the loan. This is known as a roll up of interest.

Professional Costs

You will almost certainly have a range of professionals supporting you during your project, each with their own associated cost. These professionals may include solicitor, architect, project manager, to name but a few. Professional costs can be added to your loan, in most cases.

Loan Term

Loan terms will are usually between 6 and 12 months. A longer term may be offered depending on the project. The key to development is speed. The quicker you can develop out your project and sell, or re-finance, the shorter the time needed to pay development finance costs, thus maximising your profits.

Contingency

Costs can increase for many unforeseen reasons – weather, delay of materials or services etc. The lender will want to see that a contingency has been built into your costs, so that if any unforeseen issues occur, the costs are covered. Amount of contingency will depend on the individual project; however, a contingency of 10 to 15% would be considered average.