Property Development Finance
Our commercial lending team are able to discuss development loans upto £1,000,000. Development finance is designed to help with the purchase and build costs for a residential development project.
Solutions are available for change of use, refurbishment or major building work and property extensions.
Typically, secured loans are available to fund the land/building acquisition and the development costs, over a six to eighteen month period.
Once the project has been completed, the loan is usually repaid through the sale of the property. Some development loans are renewable, which can be a life saver in the event of an unforeseen time overrun.
Who can borrow?
Experienced Individuals, or Partnerships can borrow in their own capacity, or borrow through an SPV (Special Purpose Vehicle), set up for the purpose.
An SPV is usually a limited company set up just for that project and for that loan. Using an SPV does not negate the need for personal guarantees from the directors/shareholders of the SPV.
What are the costs?
Each property finance application is costed on its own merits but the main costs will be:
- Interest – charged monthly
- Arrangement fee – can add to the loan
- Legal costs
- Valuation fees
If you have a development finance enquiry that you wish to discuss, call us for an initial fee free discussion.
020 8301 7930
Loans are split in two
The loans are split onto two parts; typically up to 50% of the undeveloped “site” acquisition and up to 100% of the build costs, drawn down in stages.
Ordinarily, the total loan should not exceed 50-60 % of the Gross Developed Value (GDV). However, if some additional investment property/s can be offered as security, a higher percentage at any stage may be possible for the right proposition.
Establishing exit strategies
A property development loan is in effect a type of bridging finance, in that it is short term in nature. As such, any lender is going to want to know, how you are going to pay back the loan; your “exit” route, which needs to be well thought out and realistic.
What is development finance?
Development finance is short term funding for many different types of property based projects.
It is similar in nature to a bridging loan as it is short term finance that can be arranged quickly. You will usually pay only the loan interest during the term with the lender receiving full repayment on completion of the project or exit plan.
The funds raised can be used to purchase and build on land, for renovations and conversions and also for property auction finance. The completed project can be residential such as family homes or commercial such as shops and offices.
Development finance is available and used by property developers, companies and individuals.
What is residential development finance?
This is a type of development finance that is geared towards the building or conversion of residential units. These could be flats, apartments or houses.
Properties do not need to be habitable and funding is available for the initial purchase and also the refurb or building work.
Read more about Residential Development Finance.
Types of development project
Lenders all have their own definition of light and heavy refurbishment, but in general:
Light refurbishment – mostly aesthetic changes rather than structural to the property. eg new kitchen, bathroom, windows, central heating.
Heavy refurbishment or renovation – more involved work including new plumbing, new electrics, moving internal walls, partial demolition, extensions, loft conversions.
Repayment of development finance
The lender will want to agree the exit strategy for a development loan at the outset, with full repayment either by sale or refinance. When assessing an application the lender will place a lot of weight on the strength of the exit strategy.
One way to repay the initial development finance is with development exit finance. This type of finance is accessible once your project has been fully completed or mostly completed. Then you can refinance with developer exit finance to reduce the interest costs and pull out equity if required.
Read more about Development Exit Finance.
FAST ~ EFFICIENT ~ PROFESSIONAL
We are well known for our knowledge in arranging property development finance, and we have helped hundreds of property developers to complete their projects.
We will take the stress out of securing property development finance for your project whatever its’ size.