Turning a rustic farmhouse into a modern luxury dwelling is a dream for many. But it’s not always so easy to achieve.
To start with, good development opportunities can be scarce and buyers are often constrained by complex planning regulations and time. Then, with the soaring costs of renovation in the current economic environment, many projects simply never get off the ground.
For Alasdair Mott*, owner of a successful catering business, his grand plans to convert a farmhouse in the Hampshire countryside might well have been one of these projects that withered on the vine. Despite building a successful company over several years, much of his capital was tied up in his business and those lofty ambitions for a renovation project seemed unaffordable.
This is where specialist private banking support can really come into its own.
Luke Page, a Private Banker at Investec, explains: “When you’ve put so much time and energy into your professional life, many entrepreneurs like Alasdair dream about big personal projects such as this one. There’s something extremely attractive about finding that perfect space for downtime, holidays or even, one day, retirement.”
“The problem is,” Luke adds, “many entrepreneurs will have eschewed a large salary as they grow their business. This means, on paper at least, a traditional mortgage looks unachievable. So, seeking support from a private bank can be the answer – it means finding a lender who will take a more holistic look at your finances and help find a solution that suits everyone.”
Realising a grand design
Alasdair’s redevelopment plans to turn his farmhouse into a luxury retreat included extending the main farm building. He also wanted to convert the neighbouring stable block into a two-bedroom annexe, ideal for putting up visitors or for use as additional living space for the family. Capping the development off, he wanted to build a swimming pool in the grounds. In total, renovation work on the site would cost nearly £4 million.
As is common with many entrepreneurs, Alasdair’s income is from a combination of salary and dividends from the company. But when looking at a conventional mortgage, this wouldn’t be large enough to meet the borrowing threshold.
“On the face of it,” says Luke, “based on the income he takes from the business, the deal wouldn’t be deemed affordable by a retail bank. For clients with a more complex income structure like this, we need to recognise that they don’t necessarily fit into a box and take the time to delve a little deeper. That gave us a more realistic appraisal of how feasible Alasdair’s project was.”
For clients with a more complex income structure like this, we need to recognise that they don’t necessarily fit into a box and take the time to delve a little deeper.
Building the perfect financing plan
First, Luke worked closely with Alasdair’s chief financial officer at his company to work out what level of income the business owner could previously have taken out of the firm.
“This isn’t something many banks take into consideration,” says Luke. “But in cases like these, making the time to assess the business in detail is critical to assessing whether Alasdair, and others like him, can afford their dream homes.”
As part of the refinancing plans, Alasdair also wanted to separately remortgage a buy-to-let property he rents out. Luke gained swift approval from Investec’s credit committee for two loans totalling £5.5million. “Time is always such a critical factor for our ambitious clients,” says Luke. “We had approximately 30 days in which we were able to complete all the necessary approvals, and we achieved this thanks to our pragmatic approach.”
For the renovation, a £4million development loan was provided at a 65% loan to value (LTV) over a 15-year period. This is another example of something that would not usually be available outside private banking, as the loan covers not only the development period, but continues for a term after the project is completed. This removes the hassle of remortgaging post-development and gives greater predictability when it comes to mortgage repayments.
The private banking team worked closely with the project’s surveyor to release the funding in tranches to ensure that money was available when necessary for the renovation work.
Investec was also able to offer a 10-year mortgage term for the buy-to-let property for £1.5million at a 70% LTV. Consolidation of the mortgage provision meant greater lending efficiency and provided Alasdair with a single point of contact for all his mortgage-related activity.
The benefit of closer, long-term relationships
Alasdair’s completed his project in 2022 using personalised lending.
Luke says: “Thanks to the long-term partnerships we build with our clients, we’re able to create more tailored solutions and connect them to experts across our private banking network.
“In this case and many others like it, taking a more holistic view of our clients’ finances gives us a better understanding of what’s achievable. As our work with Alasdair showed, we can cater for a variety of needs, including separately financing a buy-to-let mortgage.
“Even if capital is tied up in company stock or dividends, a renovation project doesn’t have to be a pipe dream.”
For more information about how we can help you with your private banking needs, please get in touch today.
This case study is a representative example based on the services we provide.
Your property may be repossessed if you do not keep up repayments on your mortgage. Investec residential mortgages are only available for residential properties in England or Wales and are primarily available to UK residents and subject to eligibility.