Property development finance
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What is a property development loan?
How does development finance work?
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Development finance is for property developers requiring funds to either build from the ground up on land with planning permission, for conversion projects, or for renovating an existing building.
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Development finance usually comes with a maximum term of 24 months.
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In many cases, the lender can provide 100% of the development costs.
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Principal and interest can be serviced monthly, but development finance providers will often look to roll up the principal and interest until the project is complete and either sold or refinanced into a longer-term finance solution such as a commercial mortgage.
Featured case study: Property developer
A property developer based in Staffordshire approached us after finalising negotiations on purchasing a hotel with planning permission to extend the hotel by adding 14 new apartments to the existing building. The client needed £900k on day 1 to purchase the property with a further £1.5m to develop the new apartments, which he later plans to operate at holiday rentals. After discussing the deal with selected development lenders on our panel that we knew would have an appetite and be able to offer 100% of the development costs on a LTGDV up to 48%, we were able to produce terms to the client the very next day.
After completing valuations, legal’s and other necessary checks the client received the funds within 4 weeks and was able to make the purchase and begin constructing the apartments over a 12-month term. The development loan will be taken out with a longer-term solution such as a commercial mortgage once the building works have been finished.
