Background
An experienced property developer and existing Avanti Finance client was looking to purchase two adjoining sections for his next development project. The plan was to hold the sites for around 12 months until they were ready to start construction.
The client already had an investment property financed through an Avanti Finance long-term mortgage, as well as a vacant section funded through an Avanti Finance short-term bridging facility, with total existing exposure of approximately $840,000.
Challenges
Although the client had a proven track record and clear plans for the sites, he was unable to demonstrate serviceability for the two new loans using traditional income-based assessment methods.
Mitigants
We assessed the overall strength of the client and gained confidence from several key factors:
- High-net-worth borrower with substantial equity.
- Excellent credit history and proven development experience.
- Multiple verified income streams, including business, PAYE and rental income.
- Existing lending and personal expenses could be serviced from confirmed income sources.
- Clear exit strategy, with a plan to refinance into a development facility within 12 months.
- The sections were located within a sought-after development where comparable properties have achieved strong sales results.
- The client was nearing completion of their current project, with these sections earmarked for the next stage of development.
Solution
We worked with the adviser to structure a solution using an alternative servicing source. Funds held in reserve were used to service interest and holding costs while building consents progressed. In addition, external development funding was ringfenced, providing additional support for the lending position.
This tailored approach enabled the client to secure the sites and progress his development plans when ready.
PRODUCT
Short-Term First Mortgage
LOAN AMOUNT
$475,000
INTEREST RATE
7.64% p.a.
LVR
55%
TERM
12 months, interest only
Short-Term First Mortgage
Non-Consumer Lending Solutions
Our Short-Term First Mortgage non-consumer lending solutions offer developers greater flexibility, whether they’re acquiring land to hold while progressing planning and consents, or refinancing from a development facility to maximise sales outcomes instead of rushing to sell.
We understand developers and property investors often have complex financial positions. That’s why we take a pragmatic approach to assessing serviceability, evaluating each client’s overall profile. Where appropriate, we may apply ring-fencing strategies, with debt supported by the income generated from the underlying properties, and consider alternative servicing sources such as rental, business, trust, investment or overseas income.
If you’d like to workshop a client scenario, get in touch.