Development Finance FAQS

Development Finance is funding which is designed to for construction, renovation or property conversions of both residential and commercial purposes. Learn more >

Development Finance FAQS

How much can I borrow with Development Finance?

Development Finance lenders consider different elements which will dictate how much you can borrow. These include a maximum against the value of the land purchased, loan to overall costs to do the work (LTC – Loan to Cost) and maximum loan based on the development’s final value (GDV – Gross Development Value) These figures vary greatly, lender to lender. 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 or ‘skin in the game’ you have, the better terms you are likely to be able to negotiate better terms with the lender.

Will I have monthly payments on Development Finance?

Most Development Finance lenders will add the payments to the loan and ‘roll’ the interest which means you only pay them back once the project is sold or if you decide to refinance elsewhere. The good news is that you only pay interest on the parts of the loan that you have drawn on, up to any particular stage.

What’s the process to apply for a Development Finance?

The first step to apply for Development Finance would be to find the right lender who may be willing to lend to you, and who has confidence in your proposed project. The next steps would involve:

• 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 worked on and completed similar projects in the past. If you have experience, it will open more doors!

How do the funds get released when the Development Finance is agreed?

Development Finance is released in stages or ‘drawdowns’, based on certain stages of the build, usually starting with the land acquisition. Progress would be monitored by the lender using professionals, such as a Quantity Surveyor. Once signed off, the next drawdown would be released.

Can I get Development Finance with bad credit?

As with most forms of borrowing, having adverse credit can have an impact on; either your ability to obtain finance, or the terms that are available to you. Development Finance is no different, although the tolerances are higher as the lenders are mainly focused on the site potential and your ability to deliver the project on time and within budget.

How do I search for the best Development Finance deal?

You can make a list of Development Finance providers and manually contact each one with your proposal to check each providers appetite. Alternatively, you can contact an experienced mortgage broker to do this work for you. A good broker will have the knowledge, industry contacts and software to make this process much quicker and efficient.

How do I pay back the Development Finance?

Development Finance lenders will always be interested in your exit strategy from inception as they want to know how they will get their money back. This will typically be by selling the asset or refinancing to a longer-term loan, or a combination of both.

Is there an alternative if I can’t get Development Finance?

Yes. The main alternative to Development Finance is Bridging Finance which is another form of short-term borrowing you can use to help fund your project. It’s worth noting that this form of finance is expensive and carries its own set of risks.

---

Book A Call To Discuss Development Finance

If you have an enquiry and would like to discuss Development Finance in more detail, please get in touch or schedule one of our Development Finance experts to give you a call.

---

At MRG Private Clients, we believe in providing our clients with personalised guidance and support when it comes to making important financial decisions. We are based in Medway, Kent but offer our specialist mortgage services nationwide. Learn more about our specialist mortgage services >