What is a Property Development Loan?

Property Development Finance is used to finance the conversion, construction or refurbishment of properties. It is usually set up over a short-term to finance the project only during the build.

We are experts in presenting development projects in the best light to lenders helping you to achieve the best terms. When packaging a development case, we always look to address the following:

• Experience – For a lender the developers experience is key to the deal. We go to great lengths to explain the background experience of our client to lenders. If you are a first-time developer, then we will need to concentrate on the strength/ experience of your contractor.

• Business plan – We provide working business plan templates for you to complete. These break down costs, show timescales for each stage, and realistic end valuations, which lenders are expecting to see. We even sense check the figures for you!

How a Property Development Loan can be used

If the land has planning permission, most lenders will require a borrower to put down a 40% deposit, some will accept 35%, towards the land.

Most lenders will appoint a professional surveyor. They will visit the site both at the outset and then prior to each major stage. This is to ensure the work has been done to the required standard and approve the release of the next tranche of funds to complete the following stage.

There are several lenders who will fund 100% of the build costs, normally where they advanced no more than 60-70% of the gross development value (GDV) of the project at any time.

Once a development is completed, the development loan will either be repaid through the sale of the units or by arranging a term mortgage. The term mortgage is based on the final gross development value (GDV) of the project.

Subject to the estimated rental income (according to a professional opinion) being high enough, a developer should be able to release up to 70% of the GDV of the project. This should repay all the funds used in the project and potentially release some profit.