A guide to property development finance

A guide to property development finance

Development finance is where an individual or company/business is looking to develop property/properties and have some capital but need a short term loan to help complete the development. Depending upon the lender and the circumstance, such loans normally span between 12-24 months. Commercial Mortgages on the other hand, are usually only required once the development has been completed and additional funds are necessary. Hence, Development Finance and Commercial Mortgages do tend to overlap.

Development Finance is rapidly becoming more main-stream and is a very specific type of finance. Development finance is an extremely active market, with businesses wanting to expand for survival during the economic downturn. There are many high street lenders out there and therefore there is a wide variety of development finance specialists available to the consumer. It is recommended that you seek professional advice in order to find the right deal for you.

Typically in the UK, Development Finance is used for various development plans such as; Property Refurbishment, New Build Projects, Property Conversions and initial land purchase and international projects. There are various different forms of this type of lending depending upon the needs of the individual/business. For example, a Senior Debt Loan usually covers the first 70% – 80% of loan to value although it can be arranged against gross development value.

However, developers often have problems getting the finance right and knowing what products are available and which lenders to use can be confusing. Which form of development funding is right for you, depends upon your vision, whether you are a homeowner looking to invest or a company wishing to expand. There is also finance available for community projects, which provide financial support to businesses and individuals in disadvantaged communities.

Therefore, Development Finance is determined entirely upon an individual assessment made by the lender. Lenders will look specifically at aspects of the development proposal, such as; land purchase, ground work/services, footings/base, first fix/second fix and final snagging/sign off. In the difficult current market, lenders have to be more careful when choosing which developers to back; they are much more likely to support a developer with experience in the field than someone new to the industry.

Commercial Lenders are there to build a relationship with the developer in order to share their vision and provide the support needed to make that vision a reality. No matter what particular development loan you have opted for, most can cover building costs, labor and architect/professional costs. Property development loans will be secured against the land or the property you wish to develop.

Loan to Value rates and interest rates vary depending upon experience and percentage of funds required for development. Benefits of this form of finance includes that each development case is assessed on its own merit and it’s a form of finance that can be raised quickly, putting your development project into fruition as soon as possible. Additionally, the lender will be continually on hand to support the developer with advice and help manage the development funds. Whether the finished project is used to expand your property or used to spark a bigger development plan, development finance is the ideal funding to support you throughout the development and you can employ the services of 1 Stop Finance at https://www.1stop-finance.co.uk/

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