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Development Finance Applications

Did you know that the supporting information and evidence you provide with your development finance application can make a big difference to the rates you're offered and your chances of immediate approval?

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-14
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Development Finance Applications

Mortgage advisors manages hundreds of development finance applications, and submitting a thorough application with all supporting documentation means a far higher chance of approval.

Any gaps in application paperwork or figures that don't include a breakdown of how they have been calculated are all red flags that the development hasn't been thoroughly planned out, and therefore poses an unacceptably high risk.

Our team assesses each application before submission to ensure it contains all the relevant information and will be easy for the lender to approve. It is a crucial step to improve your approval chances and ensure you are offered more competitive rates!

In this guide, we explain all the crucial paperwork you'll need.

For more assistance with submitting a successful development finance application, give us a call on 0330 304 3040 or drop an email to [email protected].

Planning Permission for Commercial Development Finance

Planning application or permission information will help a lender get a better idea about the viability of the development.

You can also include a link to the planning portal.

Development plans without planning permission are challenging to finance since the lender needs some assurance that you'll be allowed to proceed with your development work once you have the requisite finances in place.

Speak to your local council or planning authority if you depend on approval to proceed, as an indication in principle is beneficial if you cannot apply for planning permission in advance of your development finance application.

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  • The LTGDV is higher than 70%. Please review the Initial Loan (day 1), construction costs and gross development value fields.
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Plans and Site Drawings for a Development Finance UK Application

By including thorough site plans, the lender can visualise the project and assess the accuracy of the calculated costs.

The more accurate and detailed your site drawings, the more information available to the lender. They'll look at the layout, materials, design and complexity of the build to evaluate whether the budgets look appropriate for the scale of development.

It is highly advisable to use a professional architect or conveyancer to assist with your site plans.

Insufficient or inaccurate drawings will impede your chances of development finance approval. They may miss essential factors such as existing piping that will require extensive groundwork before your work can begin.

Planning Restrictions Impact on Development Exit Finance

If there are restrictions against what you can build or what materials you can use, identifying them at the application stage is beneficial.

Lenders will also need to know whether there are Community Infrastructure Levies payable. CIL payments make a substantial difference, as if the levy is high, it will impact the final profit.

Some regions have strict rules about materials used, particularly in ecologically protected areas, Areas of Outstanding Natural Beauty, or areas with a high proportion of listed buildings.

Researching the planning restrictions is vital since many towns have regulations protecting certain species or legislating new property builds. Hence, it's essential your lender can see that your build is fully compliant with all restrictions in place.

Costs and Budgets - Development Finance Calculator

You will need to include highly detailed budgets and not just an overall cost figure. The more detail, the better, and if this can be broken down into months or stages, all the more sufficient.

General overall costings aren't likely to be accepted since there is a high risk that the lender won't have enough information to evaluate the viability of your budget.

Suppose you do use total figures in any part of your application. In that case, it's wise to attach breakdowns and evidence or quotes to support those estimates and ensure the lender can see they have contingencies included to account for any unforeseen expenses.

Your Developer Experience

Most lenders will ask to see your development CV, and backing that up with evidence of previous projects completed makes for a much more robust application.

Previous experience improves your credibility, reduces the risk, and ensures that the lender is confident that you can successfully manage the property development.

However, you don't need to be an experienced developer. Some lenders will support first-time projects provided they have enough information and can see that you're working with professional contractors and architects with a reputation for quality builds.

Detailed Schedule of Works

When applying for development finance, you will need to agree on timescales with the lender.

Thus, they will need to know how long the development will take and when the significant stages will be complete.

A detailed schedule of works, accompanied by a budget breakdown at each stage, shows a well-planned development that is likely to run on schedule.

Even though many developments vary from their original schedule, these timings are essential for financing since they establish a rough framework for when you'll be expecting to draw down your next tranche of funding.

At each of these key stages, the lender will require a valuation and sometimes a building regulations inspection, so it's essential they have an idea about how many tranches there might be and at what expected intervals.

Development Team

Particularly if you are a new developer, the team you use - including crucial people such as the architect and contractor - will make a difference to the risk factor assessed by the lender.

If you include details of your team and their experience or professional background, this can improve your application.

Asset Schedule for Property Development Finance UK

Development finance lenders will ask for a summary called an ALIE - asset, liability, income and expenditure report.

This report is essential, so the earlier in the process you provide it, the better. The report matters since it shows whether you are financially independent and the contingency level there is to cope with any unexpected increased costs or time delays.

Lenders will also prefer to see financially stable applicants who can provide personal guarantees secured against other assets to mitigate their risk.

Exit Strategy Details for Development Exit Finance

The lender must know how you expect to repay the loan at the end of the term - whether that's through refinancing, remortgaging, or selling the property.

Exit strategies are vital. Without one, the lender has no idea how you plan to repay the short-term development finance, and they're very unlikely to approve your application.

If you plan to remortgage, having an agreement in principle based on the projected property valuation is a reliable way to show you know how you will repay the loan capital and that there is little chance your exit strategy will fall through .

Gross Development Value Estimate

GDV is a critical metric and shows the value that the property is expected to be worth on the open market once the building work is complete. This figure should be at least 20% above the project costs and ideally 30% or higher.

You'll need to have references from at least two local property agents supporting the projected GDV value. It is beneficial if you can include details of other property sales or valuations that back up your figures.

Personal ID Documents

Lastly, a UK lender needs to complete anti-money-laundering checks and will need information about your ID, deposit source and address.

Providing this information at the beginning will save the lender needing further documents later on in the process.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

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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