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What Rates to Expect From Development Finance

What Rates to Expect From Development Finance

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Property development finance rates are different from those you might anticipate from a residential or commercial mortgage - but it is always useful to know what you should expect!

The interest rates offered depend on the type of development finance you need, and your eligibility circumstances that dictate how competitive a lender can be.

You might have been offered rates that seem non-competitive or have been rejected for a development finance application, and want to review your options.

In this case, the best option is to contact the Revolution Finance team on 0330 304 3040 or drop us a message at info@revolutionbrokers.co.uk so we can steer you down the best route.

What are the Average Rates on Development Finance?

In most cases, you'll find that the rates offered on development finance are higher than you'd expect on a residential mortgage. However, funding is released in stages, and you only pay interest on your borrowings drawn down.

Most development finance loans are short term, running from three months to three years, and are on an interest-only basis.

Funds are released in tranches depending on the stage of the development project, with a site inspection usually required at each stage to confirm the progress made.

How Can I Get the Best Deal on Property Development Finance?

The best way to ensure you get the most desirable deals, including those not offered on the open market and only accessible through specialist lenders, is to work with an experienced development finance broker.

Revolution will work with you to consider:

  • How stable your exit strategy is.
  • Your credit rating and history.
  • How experienced you are in the sector.
  • What amount you wish to borrow.
  • How much of a deposit you have available.

The higher the value you wish to apply for, the better the interest rate, with the lowest rates usually offered on loans of £500,000 and above.

Many lenders have a minimum of £50,000 and will charge higher interest for smaller loans. This might mean that it is cheaper to opt for an alternative such as an equity release remortgage or bridging loan.

Why an Exit Strategy Matters with Development Finance

Your exit strategy determines how you will repay the development finance at the end of the term. The most common method is to sell the development when the project is completed, or take out a remortgage to repay the development loan.

The more reliable your exit strategy, the better the rates you will be offered. If you can demonstrate the validity of your exit strategy, such as having an agreement in principle, then you will be able to apply to a broader range of lenders.

Can I Get Good Development Finance Rates if I Have Bad Credit?

Any circumstances outside of the standard criteria mean that you will need to consult a broker to find the most competitive lending.

This includes:

  • Having a low credit score or an adverse credit history.
  • Having little development experience.
  • Having a smaller deposit.

In most cases, if you can offer additional security, such as another property, the risk factor decreases, and you can negotiate better terms.

What are the Benefits of Offering a Larger Deposit on a Development Finance Application?

Larger deposits mean borrowing a lower proportion of the development cost, and therefore offering a lower risk proposition to a lender.

If you would like expert advice about the best deposit value to offer based on your circumstances and borrowing needs, give the Revolution team a ring on 0330 304 3040.

Is it Best to Use a Broker for a Development Finance Mortgage?

Development finance rates can make a significant difference to the profit margin on your development, and so using an expert broker is the best way to ensure you find the best deals.

Independent brokers can advise on new products available, which eligibility criteria you most closely match, and which lenders offer the lowest rates.

What Alternatives are there to Property Development Financing?

There are several different alternatives to development financing. These might be preferable if you aren't able to secure development lending, or another option is more cost-effective. Options include:

Bridging Loans

Short-term term lending, usually up to two years with the lending paid in a lump sum rather than released in stages.

Other Options

Bank loans, refinancing, and equity release remortgages are all potential alternatives. You could also consider a secured loan if you have another property, and might reduce your interest charges in doing so.

Expert Support with UK Development Finance

For independent advice about the best options for your development finance project, contact Revolution Brokers on 0330 304 3040 or send us an email at info@revolutionbrokers.co.uk.

Our team scours the market to find the best deals and lending based on your requirements, and provide support with the application process from start to finish.

Check out our handy calculators

Our quick mortgage calculators are designed to give you an indication of how much you can borrow and allow you to consider the different mortgage options available to you.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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