Scenario: Being a hero with a 'construction rescue'

by Ben Abbott07 Dec 2011

Have you ever had clients that start building without finance approved, only to run short of funds towards the end of the construction? You could be their hero.

What follows in this type of scenario is often a financial nightmare, as your clients discover that traditional lenders are reluctant to lend on incomplete residences.

According to non-bank lender MKM Capital, when this scenario does crop up, there are options available for residentially secured, end-stage construction projects.

Operations and marketing manager Michael Watson said the lender has a ‘Construction Rescue’ package designed just for these types of client situations.

“Basically, if the construction has reached fixing stage, which is around 90% complete, MKM will lend against the ‘as is’ value. If construction is not this far progressed, we will still lend against the underlying land value,” Watson explained.

Options available to clients in such scenarios are often dire. They include selling the incomplete property at a significant discount, extending the construction period for months or years to complete the construction using cash-flow, or entering into a joint venture to construct for a share of end profits.

Watson said the MKM product can be owner-builder, low doc, as well as non-conforming and credit impaired, capturing a wide market the majors won’t touch. “Provided they can service the end debt it’s NCCP compliant in every way,” he said.

For clients in tricky situations, the ‘construction rescue’ could be the lifeline clients need.

“These borrowers are highly motivated to complete the property and will sell or refinance immediately after it is complete. I’m not aware of any other lender willingly operating in this space. Brokers have told us this is the kind of solutions based lending they need,” Watson said.

Ezy Capital broker Matthew Watts said being able to put clients into such a facility, complete the property and then refinance is “very satisfying”.“The client achieves their goal, and we’ve assisted them with a transaction they’d thought was impossible,” he said.

Australian Broker would like to invite all lenders to submit loan and client scenarios they think are unique, important  - or just plain confusing - to help brokers meet their client needs.

Contact the editor at to submit or discuss your loan scenario.