How to find funding for back garden property development

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Bricks-and-Money

Many people with large back gardens are tempted to make extra money by building a new house on their land that can be rented for extra income, or sold at a profit. This may seem like an easy way to make money, but it can be difficult.

For a start, planning permission is required, then a reliable builder needs to be found. After that comes the not insignificant challenge of raising finance for the new build property.

Many large lenders will offer a loan, but they may charge high interest rates. A commercial mortgage broker will be able to find the best deals at reasonable interest rates. Once a suitable deal has been found, the borrower needs to show that the building contractor has a history of successful new house building projects.

Some lenders will only release funds in stages, but there is a way around this; if the title of the land has already been split up and planning permission granted, then the plot on which the new house will be built has value. This can be used as security to release all the funds from the lender so that building can begin.

Many finance deals for building will be two-year development loans. These can be converted to buy-to-let mortgages once the house has been built, and this loan could be at a lower rate than a development loan.

Building a house or other property in your back garden can be a sound investment, as long as you are prepared for the process to be complex.

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