We do not offer ground-up development finance. But, that doesn’t mean we’re unable to support developers with our products.
Our bridging loans can help developers move on from the early stages of their development projects, and get on with the business of managing their portfolio. Our underwriter, Sumit Sapra, shared how we may be able to support property developers.
“Developers need funding to get their projects off the ground,” he said.
“While we’re unable to provide this kind of funding, we may be able to help borrowers with the capital they’ve already taken out.”
It’s possible, via other lenders, to obtain development finance for the building of property. Generally though, these loans are issued on a short-term basis.
Borrowers need to ensure they cover their facilities before they move on to the next stage of their investment journey.
Sumit continued: “We often see borrowers turn to us to clear their development finance. Usually, this is because it’s coming to the end of its term.
“This will need to be covered quickly for most, especially if they’re in the process of finalising their plans, and targeting potential tenants.
“For example, a borrower may have utilised development finance to build 3-bedroom terraced houses on purchased land. These are desirable properties and so they could have plans to let the properties out to tenants on a single title – an MUFB.
“This will take up a lot of the borrower’s time and energy to manage as it is. The last thing they’d need is an existing facility coming to an end, without a clear idea on how to address it.”
“A common issue that emerges during these types of projects is that works can over run, placing pressure on the borrower to finish the build and repay the existing investor/
“Suddenly, we’d have to make sure that the solicitors involved, valuers, and everyone in between are all synched up and singing from the same hymn sheet,” Sumit said.
“Snagging issues outside of our control can also emerge when things are rushed. Fortunately, we know how to get ahead of them before they have a chance to derail an investment.
“We could instruct the valuer to inspect the property before the works are completed. With a ‘post work value’ provided, this would speed up the loan process by highlighting any potential concerns upfront which can then be managed by the borrower and their solicitors, with a reinspection to follow later in the process’’
“If we keep everyone focused on the end point, we could minimise any potential jitters.”
We want to provide as many options as possible
At MFS, we’re always able to adapt to these kinds of complications. We can provide development exit finance for developers who need to wrap up their plans quickly, as well as a range of bespoke products designed to help straighten out a complicated web of financial obligations.
Our complex bridging loans, second-charge funding, and refinance products can all be utilised by investors who need to get their affairs in order.
What’s important to us is that there’s a solid exit strategy at play. For the developer who needs to cover an existing facility, Sumit laid out the options available.
“A developer would have a few options available to them. All of which we’d be happy to work with, so long as it makes sense for their situation,” he said.
“They could refinance down the line. Again, there’s optionality with this. They could move on to one of our other products, such as our BTL mortgage, or work with external lenders to find a solution.
“Or, in this specific MUFB case, they could sell individual units they’d built to cover our loan. Throughout the process, it’s crucial to remember that we’d be working with them to find the option they’re most comfortable with.”
Indeed, all our cases are underwritten from day one. Every broker and borrower we work with has a designated underwriter from the get-go who will guide them throughout the entire process.
We want to ensure that our borrowers are not only comfortable with their exit strategy options, but also the reviewing processes, valuations, legal stages and more.
No matter how investors want to progress, we’ll do our best to match them with a product and plan that works for everyone.
