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Smart workaround ensures funding is secured for this development project

A residential property with one home on a section size of 800 sqm was purchased with the sole intent of development. The goal was to remove the existing home and build three new townhouses in its place, each on their own title. This would provide the owner with significant capital gain and some great options for the new houses – they could occupy one (or none), rent, sell or a combination.

Some key factors that funders look for with projects of this nature include:

  • Demonstrating solid feasibility for the project. In this case the build contract was fixed upfront and the future value of the homes was known with a certified valuation on completion. Together these demonstrated a healthy profit opportunity.
  • A clear exit strategy – how will funds be repaid, mitigating risk for the funder. In this situation the client confirmed if the market remained strong, they’d sell. If not, they intended to retain the homes, renting them out. The estimated rental income was strong enough to meet the proposed mortgage repayments.

Even though the client had suitable income and an acceptable financial position, achieving bank finance for the build of all three new homes was still going to be a challenge.

The client agreed to build the project in stages, first completing two of the new homes and later building the third. This significantly reduced the risk from the funder’s perspective and bank finance was able to be secured.

Today all three homes have been completed – the first two homes sold on completion and the third has just been listed for sale.

Hear From Rocket Customers

Thanks again for your help, securing finance for the purchase of our lovely new family home. I know it’s not been an easy one due to my work situation and then all of our newbie questions, but we got there in the end! We were thrilled with the service that Rocket provided and will definitely be recommending your services to any friends or family looking for a mortgage broker.

Navigating through the tricky world of banks and home loans, it was imperative I engaged someone I could trust and Nick from Rocket Mortgages did not let me down. He presented all of the options available and sought to understand my unique needs trying to get on the Auckland property ladder. Always quick to respond and guide me through the process step by step, he made me feel at ease and confident that I was making decisions which would be best for my long-term future.
In the end the process was seamless thanks to Nick’s experience and calm demeanour. Thanks Nick!

We approached our bank seeking a mortgage for our first home. Unfortunately, they were of no help. We then approached Nick and had a far better experience. Nick explained the process in way that was really easy to understand and then went to work for us, always keeping us up to date with his progress. We were so pleased to secure a mortgage via Rocket Mortgages and are thrilled to now be on the property ladder.

Nick had great communication and answered any questions in a patient way without the technical jargon usually associated with financial services. He worked with me to fund a large residential property which had some complexity and obtained a competitive rate from the bank for which we are very grateful.

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