| GDV | ___ |
| Initial Loan (day 1) | ___ |
| Total Loan Amount | ___ |
| LTGDV | ___ |
| Day 1 (LTV) | ___ |
| Margins at | ___ |
| Build Term (months) | ___ |
| Minimum Term (months) | ___ |
| Assumed arrangement fee @2% | ___ |
| Admin fee | ___ |
| Exit fee | ___ |
| Net Day 1 Advance (after deductions)* | ___ |
Development finance is a form of lending that runs on a short-term basis and provides investment funds to build projects such as:
Here, the Revolution team runs through what development financing means, what projects it is most suitable for, and how repayments work.
There are multiple ways to finance refurbishments, conversions and new-builds, and a lot depends on the size and purpose of the development.
For more advice on finding competitive development finance, or understanding the most suitable financing for your needs, give us a call on 0330 304 3040 or email at info@revolutionbrokers.co.uk.
Development finance is usually short-term and paid on an interest-only basis. Most applicants will be:
This sort of loan is released in tranches at the pre-agreed stages of the build. Most lenders will require a site visit at each stage before releasing the funding.
In most cases, you can borrow around 70-75% of the value of the site investment and up to 100% of the build cost.
The best way to have your development finance application approved is to demonstrate that the development is viable and you have a solid exit strategy to pay back the loan.
The best way to have your development finance application approved is to demonstrate that the development is viable and you have a solid exit strategy to pay back the loan.
Other criteria include:
Although you might find that some lenders use different terminology, housing development finance is pretty much an identical product to property development finance.
That can differentiate residential development finance from commercial projects or may relate specifically to new-build residences, usually built as part of a local housing plan to address a need.
Property development is a broad term and can relate to a vast number of projects, such as:
Given this considerable scope, housing development finance isn't a different type of loan. Still, it is a development finance product designed for housing, rather than anything commercial such as a hotel, retail unit or another business site.
As a developer, your interest rates are substantially important!
Pay too much, and you might find that the expense eats into your profit margin. In some cases, the housing market could change during development, and so if you find yourself needing to sell at less than expected, the cost of your financing could mean you struggle to break even.
Therefore, it's essential to ensure you work with an experienced, independent broker.
We work as advocates for our clients, with access to our complete whole-of-market network of lenders, including broker-exclusives and niche development finance providers that don't deal directly with the public.
You can also look at several steps to improve your chances of being quoted highly competitive development finance rates:
If you need any support with constructing your development finance application to help access the best borrowing rates, please give us a call, and we'll provide tailored advice to strengthen your documentation.
Property development finance is only ever intended to be a short-term loan. The interest rates are higher than on a conventional mortgage, and you'll need to explain how you expect to repay the capital borrowed when the term ends.
Here are a few example exit strategies:
The lender needs an assurance that you will be able to repay their loan, hence the need for a strategy to show them how you expect to repay.
It's also better to repay development finance sooner rather than later if you can because the costs are higher than other property loans.
Therefore, you could blend your exit strategies - so remortgaging on a residential, commercial or buy-to-let mortgage as soon as the building work is complete, with a view to selling it on when market conditions are optimal.
Note that a lender won't approve any development finance application without an exit strategy, so this isn't a decision you can make later on when work has already started.
Property development finance can be an excellent way of raising funds for projects that wouldn't be eligible for a standard mortgage product.
Although rates are a little higher, it's also more stable and affordable than a short-term loan or unsecured debt since a physical asset is secured against the loan amount.
Before making any long-term financial decisions, we'd recommend you seek professional, independent advice from the Revolution team. We ensure that any product you apply for is of good value and represents an advantageous borrowing route that will offer you the opportunity to finance your development without paying unnecessary charges.
For support at any stage of your development finance application, please give us a call on 0330 304 3040, or drop an email to the Revolution team at info@revolutionbrokers.co.uk.
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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.
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