Easiest Way for Developers to Raise Money?
In short, development finance is used by property developers who are looking to raise money against either existing land that they own or land that they’re looking to purchase to, generally, build houses upon. This sort of finance can be arranged with or without planning permission and it’s usually the easiest way for developers to raise money to build properties in a time-effective but profitable way.
How Much Can I Borrow?
The amount is usually based on the percentage of the GDV at the end of the work. There’s rarely an upper limit to your borrowing potential, though it obviously depends on your proposal and usual financial application factors, but there may be a limit if you want to borrow a smaller amount where a refurbishment loan could be more acceptable.
It’s also possible, and common, to get a loan to finance up to 100% of development costs if you already own the land on an unencumbered basis. These types of loan are usually structured to utilise the developer’s contribution upfront, with the lender then providing most, sometimes all, of the build costs. And it’s not uncommon for funds to be drawn down in stages once the build reaches certain criteria.
How Long Can I Borrow for?
Property development loans are usually arranged on an interest-only basis and are typically 6-24 months in length, depending on the size of the project. It should be noted that this interest can either be rolled into the loan or paid monthly and most exit fees are already pre-calculated on the borrowed amount and not the GDV.
Obtaining funding without having full planning permission is very difficult to get, unless you’re an experienced developer with a number of completed development projects in your portfolio.
Like a commercial mortgage, there are no set rates for property development finance.
Contact The Mortgage Hut for Developer Finance Advice
Every developer finance case is individually assessed by the lender to ascertain the strength of the proposition and your borrowing power.
Having this type of finance in place means that you can concentrate on running the project without having to worry about funding.
Depending on the type of project, there’s a raft of options and variations of development finance available to you, whether that’s the aforementioned refurbishment loan for up to 24 months of building costs, or if you’ve got a bigger project such as a ground-up development, there’s the option to cover both land purchase and building costs.
However, this sort of loan can be a complicated process and requires a wider knowledge of the mortgage market.It’s imperative that you speak to a experienced development finance adviser that has access to a wide panel of lenders to ensure that you have the best chance of getting your mortgage approved.
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