Property Development Finance is a specialist short-term financial product also called Property development loans, usually, for a period of 12 months, a term of longer than 12 months would only be considered in exceptional circumstances.
A 12 month period is considered ample time for the average developer to build out a scheme and achieve some resales, after 12 months most lenders will allow an extension of up to 6 months in order for you to sell the remaining properties.
If after the 6-month extension you have still not sold the properties the lender would expect you to pay them back all of the outstanding loans. If you still have an outstanding amount and are unable to clear it or want longer to achieve the sales, then you would have to replace the development loan with developer exit finance.
The good thing about developer exit finance is that it is significantly cheaper than development finance, basically because the properties are finished a lot of the associated risk has been removed from the loan, this will allow you to sit on the property for longer and will allow you to achieve a better price, alternately you could arrange a buy to let mortgage and keep the properties although once you decide to keep the properties as an investment you would lose entitlement to any VAT that has been reclaimed on the construction costs.
When you take out property development finance a drawdown is made against the land or the existing property that you intending to develop. It is also agreed at which time the additional drawdowns are agreed. This could be either at set stages of the construction, e.g floor slab, wall plate, roof, watertight, first fix, second fix, completion. Or another option is to agree a monthly payment at the end of each month. Either option is generally available from a lender, although usually you would draw down based on actual works completed, this is what 90 % of borrowers do because construction can be in spurts due to bad weather shortage of materials etc, this is the preferred method.
Usually, lenders prefer to deal with the developers who have had previous experience, this would be considered to be that they have completed least three or four developments completed and all of the properties have been sold, not retained for investment purposes.
1st Stop Finance look at each case individually, no matter what your experience we have lenders that will look at the proposition based on merit. As long as your case is presented well and as long as you're looking at this as a business transaction and are able show that you can employ tradesmen and contractors to carry out works on your behalf, then we have lenders who would be prepared to offer you funding.
Property development loans start at around £100,000, obviously refurbishment would be considerably less than this, but anything less than £100,000 would really be a bridging loan as these loans can be taken out from as little as £30,000.
Loans of £150,000 and above it would be treated as development finance with no upper limit and we can arrange to finance up to £10 m.
The vast majority of development loans would be in the £300,000 to £3 million region.
Also, the majority of development loans taken out tend to be around 80% of your costs although up to 90% is available by a few lenders although interest rates at this level can be expensive, it really depends how much cash you have to put into the project. As a rule of thumb the high the percentage of costs you want the higher your interest will be.
Some lenders will offer up to 100% finance, however this will usually mean you giving away half of your profit and some of them even want up to 60%, it's far better to keep below 90% of costs which would give you a reasonable interest so that you can get a get a good for your efforts.
Our development loans are available in all of the UK including Scotland England Wales and Northern Ireland.
Finance is available for residential, commercial and semi commercial properties including new build conversion and refurbishment.
The finance we offer can cover many different scenarios, such as:
-Commercial property development
-Residential property development
-Developments at varying stages of completion
-Land without planning permission
We have been a development finance broker for many years and during that time we have built ties with all of the reputable lenders in the UK who offer finance for property developers
We can provide you with expert advice in order to achieve the finance of your looking for and we work tirelessly to make sure that we get you the best loan for your circumstances.
Specialists in Property Development Loans
Up to 90% of all costs available
We never charge upfront or broker fees
FCA Regulated business
Over 20 years getting finance for Developers
400+ 5 star reviews from clients
We always go through all your options with you
We do not get paid unless you get your loan