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Development Finance Frequently Asked Questions
Revolution Brokers works with a vast range of development finance lenders and borrowers. We understand that the scope of the market can make it a minefield for applicants to navigate.
Here we've collated the most commonly asked questions we receive to give you as much information as possible about how development finance works.
If you have any further questions, we haven't answered, or need professional advice about your development project, give us a call on 0330 304 3040 or email us at [email protected].
How Much Can I Borrow With Development Finance?
Most UK lenders start at £50,000, and you can borrow up to any amount depending on the scale and value of the development.
Maximum loans for each project will depend on the total costs, how much the development will be worth on completion, and how much the initial investment value is.
Usually, you'll find that loans are capped at around 75% of GDV (the anticipated project value when complete). Some lenders also limit development finance to 90% of the build costs.
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What are the Average Interest Rates on Property Development Finance?
Interest rates vary significantly depending on the project. Smaller loans will carry higher interest rates than larger applications since there isn't an economy of scale available.
Typical interest rates for the most viable projects start at 4.5%.
How Long Does a Development Finance Application Take?
Application times will depend on how quickly you can return the required documents, how soon a surveyor can complete a valuation, and whether the lender has any further questions or queries that need answering before the loan can proceed.
Mortgage advisors provides full project reports with every application to streamline the process and expedite approvals.
Generally, you'll find that the funds are available within two to eight weeks of the offer to lend.
When Do I Pay Back my Property Development Finance Loan?
Lenders have different terms on their development finance products. Usually, you don't need to pay back anything until the project is complete, although some providers will accept interim interest payments.
In most cases, the interest is rolled into the loan, and the total capital plus interest is repaid when the development has finished.
Can I Borrow From Development Finance Lenders as a New Property Developer?
You can indeed; although you stand a much better chance of approval by working with an expert broker who can negotiate terms on your behalf with a lender.
As a new developer, your application will be considered a higher risk than that of an experienced applicant, so it's even more crucial to seek specialist advice.
Can I Apply for Development Finance on any Property Build?
Most types, yes. The Revolution Brokers team works with lenders specialising across the spectrum of property developments, including:
- New builds
- Residential and commercial conversions
- Mixed-use properties
- Environmentally friendly builds
- Regulated and unregulated developments
- Refurbishment projects
It is vital to work with an expert broker, to ensure you apply to the right lender who can approve development finance for your type of intended build.
Can I Get Development Finance Even if I Don't Have Planning Permission?
You can - although it's easier to find competitive lending with planning permission, it is still possible to secure a loan without.
Planning can increase the valuation estimate of a plot by as much as 30%. Therefore, you're likely to be able to borrow more, and a higher proportion of the cost of the development.
In some cases, you can borrow as much as 85% of the anticipated project value, even where planning permission isn't yet in place.
How Soon Should I Apply for UK Property Development Finance?
The best time to apply for development finance depends on:
- Whether you already own the land or property, or need the financing to include cash to fund the initial purchase.
- How soon you expect to start work.
- Whether you have detailed plans and budgets ready to include on your development finance application.
It can be tricky to gauge the appropriate time, because if you need funding to support the purchase, you might not have planning permission or detailed plans yet in place.
However, it's best to get started with the application as early as you can, since it can take some time to progress through and provide your selected lender with sufficient information for them to offer approval.
If you own a parcel of land and have a good idea of the costs for the build and end value, now is the time to give Revolution a call on 0330 304 3040.
Likewise, if you're thinking about starting a development and aren't sure of the best way to proceed, get in touch and we'll explain the best options.
What Project Costs Do I Need to Include on a Development Finance Application?
Keeping tight control of your costs is essential - and any lender will want to see that you've built in contingencies, and included all of the overheads associated with financing a UK property development.
- Arrangement fees anticipated from your lender - these are usually around one %, but a lot depends on how much deposit you're putting down, and the lender you choose.
- Exit fees, which can be chargeable by some development finance lenders depending on the amount of the loan, and the end value of the development.
- Interest charges - you'll pay these usually every month, but based only on the amount of borrowing you have drawn down from your development finance facility thus far.
- Professional fees include solicitors, architects, project managers and of course your contractors carrying out the physical building work.
Although you might not know the exact cost for every element of your project, it's essential to include provisions and estimates to ensure the development finance value covers the full requirement.
Should I Include a Contingency Figure in My Development Finance Budget?
Absolutely! Contingencies are expected, since it's never possible to know every precise delay, material uplift or extra labour charge, for example.
Most experienced property developers will build in between 15% and 20% across their whole budget to ensure they've covered any unforeseen expenses.
Lenders will usually query any applicant who hasn't included a contingency, since this leaves zero wiggle room to cope with extra costs that typically occur at least once or twice.
How Do Building Regulations Impact a New Property Development Project?
Building regulations are different from planning permission, and something you'll need to comply with separately.
In short, the regulations mean that every new development or construction must be built to national standards to ensure they are safe for people living in them, and travelling nearby.
Most buildings are covered, and you can apply for Building Regulations Approval via the relevant local council. Usually, that means submitting a full plans application, and then receiving visits from an inspector at key stages.
Some contractors will manage the building regulations process, and provide certifications that everything is compliant - but you need to check that from the outset.
If the builder isn't managing building regulations inspections, you will be liable as the property owner, and in the worst case scenario could be served with an enforcement notice to correct any aspects of the build that don't meet the health and safety standards.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.