Development Finance
What is development finance
Development finance is interchangeably used for refurbishment finance, refurbishment loan, new build loans or property development finance. In essence, it is a type of short to medium term finance product used to support purchase, refurbishment and development of residential, commercial or mixed-used property.
Here are some scenarios where development finance can come real handy:
- Refurbishing a standard residential property.
- Converting a standard residential property in to houses of multiple occupation.
- Conversion of commercial properties to residential units.
- Refurbishing block of apartments and splitting the title.
- New build sites or ground up developments.
The key here is short-to-medium term i.e. typically the term will be 3 to 18 months, sometimes 24 months on a bigger development project. The idea here is to raise funds to develop a property or a site and refinance or sell at the end.
Typical terms:
- Interest Rate: From 0.85% pcm onwards
- Arrangement Fee: 2%
- Term: 3 to 18 months
- Loan to Value (LTV): 65% to 70%
- Loan to Cost (LTC): Up to 85%
- Loan to Gross Development Value (LTGDV): 70%
- Development Costs: Up to 100%
- Interest payments are typically rolled up and paid at the end.
- Legals and valuation costs separate (however dual representation solicitors possible with some lenders to save costs)
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