MORTGAGE BROKER IN KENT, LONDON & SOUTH EAST
DEVELOPMENT FINANCE
Development Finance is short-term finance, released in stages to purchase and/or develop a site, it can be used for commercial or residential units
What Is Development Finance?
Development finance is a specialised type of loan designed to fund the construction, renovation, or conversion of properties. Development finance is utilised when a property or site does not yet exist or will undergo significant changes through construction or extensive renovations. Development Finance is a short-term borrowing option so is designed to be redeemed by either selling the completed units or refinancing to a longer term loan. Learn more with our Development Finance FAQs >
Who Is Development Finance For?
Development finance is tailored to various types of projects and borrowers, including: residential property developers, commercial/semi-commercial property developers, and single-unit or large multi-unit development schemes. Individuals, limited companies and any other legal entity can apply for development finance.
What Are The Advantages Of Development Finance?
Loan based on future completed value (GDV – Gross Development Value), not initial value, which may be lower.
Interest rolled up and added to loan to help cash flow and interest only accrued on actually funds drawn down, minimising overall cost.
Some lenders offer 100% of build costs.
Competitive terms for developers with good track records.
What Are The Disadvantages Of Development Finance?
Stringent checks and due diligence by lenders, involving documentation and site visits.
Higher interest rates than standard mortgages due to lender risk.
Difficulties to obtain if borrower is inexperienced or project is troublesome.
Risk of project overrunning on time or costs which can impact the cost of the finance.
Examples Of Where Development Finance Can Be Used
Residential developments of any size (1-5 units or over 200).
Commercial developments.
Properties / buildings under Permitted Development Rights for modification/change of use.
Process And Documentation Required For Development Finance
The process includes:
Initial enquiry and formal application
Agreement in principle with terms and conditions
Lender due diligence (site visits, valuations)
Formal loan offer and acceptance
Legal documentation
Drawdowns during construction
Repayment upon sale or refinancing
Documents required:
Personal guarantees
Planning permissions and drawings
Cost breakdowns and schedules
Development experience and past projects
Contractor information and financials
Defined exit strategy
