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Development finance
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Contents
Can I get development finance?
Development finance can encompass ground-up builds and property renovations.
You can get development finance with or without experience. If you are taking on a ground-up build and don’t have direct experience yet, lenders will expect you to be using a contractor to do the work. The criteria for borrowing to do renovations is more flexible.
You can borrow up to 70% of the gross development value, which is the value of the property, once works are complete. You will need to provide a schedule of works or development appraisal to demonstrate to the lender what your plans are and the costs involved.
Factors that may impact you getting development finance
- Some types of adverse credit
- Not having enough money for a deposit
If you have questions, chat to our advisors on live chat, via the phone, or get a call-back, we're here to help.
Today's development finance rates
The variables involved in development finance, mean our advisors will need the details of your case, to give you an interest rate based on today’s lender options. Enquire online now.
Eligibility for development finance
- You can be a first time buyers or experienced investor
- You must be at least 18 years old
- Deposits for ground up builds from 30-45%, or from 25% on renovations
- Upper age limits at application are flexible
- Low personal incomes are accepted
- Property, pension and employment income is OK
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What is development finance?
Development finance is a short term loan used to either purchase a site for a development, cover the costs of building the development, or both. It can also cover renovation projects that might make use of bridging loan products.
Ground-up builds can take many shapes and forms, but the ultimate goal is to sell or rent the property, or properties, for profit.
Unlike a residential or traditional buy to let mortgage, development finance requires a bespoke financial solution tailored to your project. Development finance rates vary, depending on your project and the lender you choose.
Whether your project is small or large, our development finance team can find the right lender for you from our range of specialist lenders. Get in touch today!
What can I use development finance for?
You can use development finance for any property type from residential, to mixed-use/semi commercial and pure commercial premises. You can also borrow for a range of reasons:
- Renovations
- Conversions
- Refurbishment
- New builds
The scope of your project can include anything from a single unit (one property) to a large multi-unit development comprising multiple property types.
How much can you borrow with development finance?
You can borrow from £30,000 - £30,000,000. Each development finance solution is bespoke and will vary depending on the lender you choose to work with.
For ground-up builds, the maximum loan to value is typically around 70% of the end value of the property being built. You will need a deposit of at least 30-45% of the initial purchase price of the land.
For renovations, the maximum loan to value is 75% of the property value, so you will need at least 25% as a deposit.
How long can you get development finance for?
Terms of a development loan vary, but are typically between 12 and 24 months. This, like many factors of development finance, is dependent on the project the finance is required for.
If you are borrowing for renovations the term can be from 3-18 months.
Some of the lenders on our panel charge exit fees. If this is something you want to avoid, tell your advisor when they are discussing your case with you, before they research products for you.
How long does it take to get development finance?
A development loan application usually takes around 8 weeks to be processed by a lender, but it can be quicker, providing any documents promptly and efficient solicitors will help with this.
With some larger projects, the release of funds is split across a series of drawdowns, subject to a monitoring surveyors sign off.
The lender will instruct a surveyor to go and inspect the works, to check that everything is proceeding on track with the proposal. The surveyor would collate a report and then the funds would be released following an assessment of the progress by the lender.
We work with a wide range of development finance lenders, including:
Why choose Commercial Trust?
Apply with ease by phone
It couldn't be easier to secure development finance with our expert advisors. Ask all your questions and arrange an application, on the phone, from your sofa!
World class customer service
We'll find you a great deal and take all the admin work off your shoulders, so you can relax while we get your loan paid out. All the while giving you progress updates.
Specialist expertise
We specialise solely in property investment solutions, which means that you will get a recommendation based on detailed knowledge of the latest deals available.
We can help you with...
- Purchasing or refinancing
- Development finance for ground-up builds
- Conversions from commercial to residential
- Borrow up to 70% of the gross development value
- Refurbishment of uninhabitable property
- Borrowing funds for up to 36 months
- Investing in personal name
- Investing via a limited company or Special Purpose Vehicle
- Investing via a Limited Liability Partnership
- Serviced interest (paid monthly)
- Retained interest (paid at term end)
- Long-term refinancing options
Costs involved in development finance
Lenders may charge you for the valuation conducted on your property. They often also charge a product fee, sometimes this can be added to the mortgage.
You will need a conveyancing solicitor who will charge fees. Read our guide to choosing a conveyancing solicitor.
We charge a broker fee for our work. You pay in two parts. A booking fee, once we have found you a mortgage deal, at application. The majority of our fee is paid at completion of the mortgage.
Every development finance loan comes with monthly costs based on the interest rate the lender charges. These are paid on either an interest-only or capital repayment basis.
How to apply for development finance
1
Tell our advisors about the project you are investing in, your needs and circumstances and exit strategy for paying off the loan. If you have credit concerns, let us know, so we can put you with the right lender.
2
Your advisor will find the best possible deal from a range of lenders and, if your exit plan requires it, also investigate long-term finance. They will get you a lender decision in principle, this requires a soft credit search (occasionally it is a hard credit search).
3
Your advisor will call to discuss the product they have found for you. You will be presented with a tailored solution, which is the best match for all your needs and offers you the most cost effective option.
4
On your instruction, your advisor will submit your application to the lender. A valuation report will be needed from a surveyor. Site visits will follow. Your account manager then does all liaison and administrative work to get the funds paid out.
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Frequently asked questions
No. Most lenders will cap the amount they are willing to lend at around 70% maximum of the end value of the project. However, if you do not have a deposit in cash, you may be able to borrow against other property you own to raise a deposit.
It depends on what you mean by property development. When you are building a brand new property, often referred to as a ‘ground-up’ build, because you are literally building everything from the foundations to the roof, then you can use cash or borrow via a development finance loan.
If you are only renovating or refurbishing a property to upgrade it, or to sell it on for profit (flipping property), then a bridging loan might be more appropriate.
A specialist broker can help you establish what type of product you need.
Yes, banks and specialist lenders offer loans specifically for property development. In the financial industry, property development finance means building a property from scratch, so if you just want to do some renovations, a bridging loan is more appropriate.
Property development finance products can either be regulated or unregulated.
Regulated development finance is for building a property you will live in. This part of the lending industry is overseen and monitored by the Financial Conduct Authority (FCA) as the products are intended for consumers who may not be familiar with how they work and therefore require a level of protection on the rare occasion anything should go wrong with the lending.
Unregulated development finance is for building property that will be sold, or rented out by paying off the borrowing with buy to let mortgage or commercial mortgage funding. This type of lending is not regulated by the FCA, because it is finance typically used by property developers or investors who are familiar with how they work.
Development finance interest rates are very specifically tailored to the nature of the project. If you are building one or two properties, your funding needs will be radically different to a property developer building a 200 dwelling housing development, or a large commercial premises.
As a result, you tend not to find development finance interest rates published online by lenders.
To understand what the rate and costs involved in your project, and to ensure you are getting a competitive deal based on a search of a wide choice of lenders, a specialist broker can help.
Securing development finance as a first-time developer can be challenging, but it’s entirely possible to secure funding for your first project.
First-time developers will have reduced options in terms of available lenders. However, if your project is a small ground up build of one to three units, this is a good place to start for someone new to this type of property investment.
You may be able to secure funding for larger projects by partnering with an experienced developer, but lender criteria varies so much that you cannot guarantee this.
The best approach is to start with one to three ground-up residential units, and build a resume of experience in order to secure funding for more complicated projects.