Development finance is funding designed for construction, renovation or property conversions of both residential and commercial purposes.
How much can I borrow with Development Finance?
Development finance lenders consider several elements: a maximum against the value of the land purchased, loan to overall costs (LTC — Loan to Cost), and maximum loan based on the development's final value (GDV — Gross Development Value). Some lenders may lend 70–75% of a purchase, 100% of the costs to complete the project, and up to a maximum of 70–75% of the GDV.
How much deposit do I need for Development Finance?
The minimum deposit for development finance is at least 25–30% for a project with planning permission. The more deposit you have, the better terms you are likely to negotiate.
Will I have monthly payments on Development Finance?
Most development finance lenders will roll the interest, which means you only pay back once the project is sold or refinanced. You only pay interest on the parts of the loan you have drawn down at any stage.
What is the process to apply for Development Finance?
- Initial enquiry and formal application
- Agreement in principle with terms and conditions
- Lender due diligence (borrower checks, site visits, valuations)
- Formal loan offer and acceptance
- Legal documentation
- Drawdowns during construction
- Repayment upon sale or refinancing
Do I need experience to apply for Development Finance?
No. There are development finance lenders who will consider borrowers with little or no experience if they have an experienced team around them — for example, a project manager and main contractor who have completed similar projects previously.
How do the funds get released?
Development finance is released in stages or drawdowns, based on certain stages of the build. Progress is monitored by the lender using professionals such as a Quantity Surveyor.
How do I pay back the Development Finance?
Lenders will always be interested in your exit strategy from inception. This will typically be by selling the asset, refinancing to a longer-term loan, or a combination of both.
FAQs
Is there an alternative if I can't get Development Finance?
Yes. The main alternative is bridging finance, which is another form of short-term borrowing you can use to help fund your project.
Do I need planning permission?
Most lenders will require planning permission to be in place, although some will lend on projects where planning is being sought.
If you’d like to talk through your situation, call us on 01277 564 054 or send a message.
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