I have a question for you, but better give you a little background first.
Unfortunately, I am in a bit of time related trouble with a part-completed development project. I own some land and derelict barn outright with no mortgage. Originally it formed part of my adjoining property and I split them away. Currently, I am 10 months into a large barn conversion, which should have taken 11 months to complete.
I found a bridging lender myself and set up a 15-month development bridging facility. So the rolled-up interest on the bridging loan, even at 15 months, would only ever have been at 40% of the developed value.
The intention was to exit the bridge facility using a holiday let mortgage and a condition of the Bridging Lender was a lending decision in principle from a holiday let mortgage lender.
I had a fixed price contract with the builder, as this was another condition of the bridging lender and the project had to be Architect supervised. However, dealing with the builder has been a nightmare and he has now been declared Bankrupt.
Fortunately, the stage payments on the bridge have been in arrears, so what I have on site in respect of materials has been paid for, which is some consolation. But the sub-contractors that he had been using have not been paid, so nothing has been going on for almost 2.5 months.
This project stands no chance of being completed in the next 5 months, as the conversion is only at “wind and watertight” stage.
I have already asked my bridging lender about an extension, but they are not moving on the 15 month term and have written to me stating this. The consequences of an overrun are frightening. They will charge me another set of fees, put me on penalty interest rate of 3% per month and possibly put in someone it to take over the contract, then sell the property
I am feeling pressured over this and worried to say the least.
My question is, can you find a bridging lender to re-finance a part completed development project, at the build stage that I am at?
Regards, David W
Sorry to hear about your situation, from time to time this does happen. You have found that usually it is wiser to ask for a much longer period for a bridge than you think you are going to need. With the right bridge there should be no early repayment charges and it costs you almost nothing for that extra time.
The answer is yes, we should be able to find a lender to help you.
In your favour is:
- The project has gone wrong through no fault of your own and any lender will be able to see this immediately.
- Architect supervision, giving the lender comfort in terms of what has been built so far has been done properly. I presume that the architect will warrant to this effect. Any lender will want to know that this project has been correctly supervised, as barn conversions can have issues with loading etc, so they will want to see his drawings, calculations and sign offs.
- You have not mentioned a structural warranty, so we surmise that the build will be covered by Architects certificates.
- LTV, as you already owned the land outright, the overall build cost and roll up will not exceed lenders GDV limits.
As you have an agreement in principle with a holiday let mortgage lender, this tells us something about your overall financial position. It is probably the case that the agreement is now out of date and we would be happy to get another for you to get to satisfy the new bridging lender.
If you would like to call our office, one of our team will pick this up for you quickly.