Mr & Mrs Wilson are property developers and had purchased a derelict barn and the 3.75 acres of land which it sat on. They had redeveloped the barn and planned to move into the property.
When they first purchased the property and land, the council placed an overage clause — meaning no alterations could be made to the property or land without raising £150,000 to pay off the clause.
Mr & Mrs Wilson wanted to separate the current plot and had architecture plans drawn up to develop the surrounding land for affordable housing.
Not many lenders will allow capital raising for buying out an overage clause. In addition, Mr & Mrs Wilson do not take large salaries from their development company and this raises affordability queries for the £200,000 required to complete the project.
The lending was leading into retirement and their son needed to be added to the mortgage to support affordability. Mrs Wilson is the sole owner of the current property they live in and wanted it to remain this way.
We managed to find a lender who would allow for the proposed course of action, and we advised the client to take a fixed rate mortgage for two years as the property had a very low loan to value ratio. This solution also allowed Mrs Wilson to increase the company’s profitability if the planning permission was granted for the surrounding land, and in future years it will be easy to remortgage as the property will no longer have the overage clause on it.
There was another option to consider which was a bridging loan to remove the overage and then look at a standard remortgage. However, the fees for this are very expensive and we wanted to avoid this scenario.
Both Mr & Mrs Wilson are extremely happy that we found them a solution and know that their mortgage payments will remain affordable for the next two years, allowing them to continue growing their property development business.