DEVELOPMENT FINANCE
What is Development Finance?
How is Development finance used?
It is used as short term funding to build, renovate or convert a property or development of any size, be it residential, commercial or mixed use.
The loan is secured as a first charge against the site/project and the financing will be determined on the Gross Development Value (GDV) – This is what the site/project will be worth at completion.
Property development finance can cover the purchase (or refinance) of a development site in addition to build costs, plus the interest and fees.
It can be used a variety of different scenarios, such as the new build of both residential and commercial projects, mixed use developments (residential with commercial element), student accommodation, office blocks, industrial units, hotels, holiday homes, large housing estates, smaller house developments, block of flats, care homes and care villages to name a few.
How does Development Finance Work?
The first stage would be to obtain funding to purchase the site. If the site has been purchased then a possible refinance will be required. The lender would normally give you a percentage towards this and request some contribution from you.
The second stage of lending would be for the build of your project. In many cases and dependant on the deal being presented, lenders may fund 100% of the build cost on a stage payment basis (this means they will release the monies for the build project in phases. This can be monthly or quarterly depending on the project).
Depending on your project, a lender may request monthly or quarterly visits from their surveyor. This will be to monitor the project and ensure it is coming along as it should be.
What can development finance be used for?
This type of finance has become more liquid over the years with specialist, private and alternative lenders entering the market, making it more competitive with a range of loans available.
Each and every project will be different and will be uniquely packaged and presented to ensure you obtain the most competitive rates and terms to fund your project.
At London FS we have access to the whole of market for your development project. Offering our clients a full spectrum of choice in senior debt loans. Our primary goal is to provide the best terms to suit your position now and at the exit stage. We can look at the following type of development finance:
- Residential new builds (regulated funding)
- Commercial and mixed use
- High-end self build projects
- Hotel development
- HMO Conversions / heavy refurbishments
- Care Homes and Villages
- 100% funding in some cases, no restrictions on geographical area
- Refinancing for exits
- Charity development funding
Property Development - Things to consider
The Term
Repayment of the Development Loan
Planning permission
Land can be available with planning permission, with outline planning permission or with out planning at all. Lenders will look at deals without planning but may restrict their contribution and loan to value to reflect this, also taking into consideration market conditions.
Exit Strategy
Experience
Experienced developers, who can prove a successful track record will benefit from favourable terms.
There are many lenders who now look at first time property developers. Having an experienced team, such as architects/project manager and build team are essential. You will need to convince the lender you have the ability and structure in place to develop/refurbish your project successfully.
Terms
Rates
Costs
Fees
Expect to pay anything between 1-2% in lender and broker fees. Costs to cover valuations, ongoing monitoring and non utilisation fees may apply.
Exit fees may apply depending on your deal, however these maybe mitigated if we can place the lending with the same lender on a term loan as an exit route. Also exit fees will only be payable on funds drawn down.
100% Development Finance
Can I get a 100% Development Loan?
Speak to an advisor
How can we help with your property development project?
THE INFORMATION YOU WILL NEED:
- Information on the project. It would be extremely helpful is you have a [Development Appraisal and Detailed Build cost & Cash Flow]
- A copy of the Planning Permission [if present. If not the proposed scheme will do] and
- Details of your experience.
- Personal Asset and Liability Statements for the Borrower(s)
- Company details (if applicable)
- Copy of Sales Particulars/Valuation [if available]
- CV’s for the Borrower(s) [including previous experience]
- Planning details
- Financial appraisal
- Confirmation of number of units, storeys, square footage and number of bedrooms in each property
- Contractors details
- Details of any section 106 agreement (if applicable)
- Any information which may support the estimate of Gross Development Value (GDV) such as SOLD comparables
- Solicitors’ details
Property Development Finance - Next steps:
Mortgage affordability how does it work?
You are about to embark on the journey of buying your own property,
Remortgage or rate switch?
When you come to the end of your existing deal with your current
