Helping property developers get the right finance

Our aim is to provide you will all the information you need to know on property development finance as well as help you source the best funding available for your project.

property development funding

We will look to provide insight into all areas of finance:

  • Rates and Loan-to-Values available in the market
  • Lenders in the market
  • Types of loans available
  • What do I need to make an application and what is the process?
  • What is property development finance?

There are a lot of lenders who are providing property development finance and as a property developer it is important that you make sure you are getting the best offers out there.

We can search the market for you and provide you with some indicative terms free of charge. There is no obligation to progress with any offers and there is no credit checks conducted at the initial stage of the enquiry.

Search the market...

Let us search the whole market for you free of charge and get you quotes to consider. There are a lot of lenders in the market so you want to make sure you have the best facility!

Rates and Loan-to-Values Available

The property development finance market is quite fluid with different lenders always entering and exiting the market, as such it is always best to search the market to find out what rates and Loan-to-Values are available.

It depends on the size and nature of your project for what rates you can get. On loan sizes of about £500,000 and over then there is potential to get rates as low as 0.43% per month. If you are looking at under this figure, then you can be looking at around 1% per month on the money drawn down.

The rates depend on other factors as well including the location and your experience. For example, the larger lenders are generally more strict on experience, so if you are a new developer then it's likely you will have to use a smaller specialist lender and these lenders are typically more expensive. On the plus side they are more personal to deal with and will help you through your project more.

Loan-to-Values also vary depending on the specifics of the project. On a new build project you can typically get up to about 65% loan-to-value. Property development lenders work backwards in assigning funds, therefore they will first cover 100% of the build costs and then if there is any room in the facility they will provide funds towards the purchase price up to 65% loan-to-value. Loan-to-value can be looked at in two lights, both the loan cannot exceed 65% of the current value of the plot/property and the total loan cannot exceed 65% of the end value of the completed project. This is often termed Gross Development Value.

It is also worth baring in mind a lot of lenders use a Gross Loan-to-Value which means that they include the fees and interest in the loan facility.

It is also worth noting that some lenders will go higher Loan-to-Values but will be more expensive because of it. So it's having a balance of getting as much funds required to make the project feasible and keeping the loan down as much as possible to minimise borrowing and keep your costs down.

We have access to a wide array of lenders in the market including specialist banks, building societies and private lenders.

Compare Rates & Loan-to-Vales

Let us search the whole market for you free of charge and get you quotes to consider. There are a lot of lenders in the market so you want to make sure you have the best facility!

Property development Lenders in the Market

There are a few different types of property development lenders which we categorise in the following way:

High-street Banks & Building Societies

As we're sure a lot of you are aware a lot of the high-street banks dropped out of property development funding after the Financial crisis of 2007-2008. Some of these lenders have started to do some development loans however these are typically on large scale developments or with existing customers.

Rates are typically lowest here at around 4%-7% p.a. on money drawn down (plus associated fees). Some lenders include Lloyds, HSBC, Barclays, etc. 

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Lloyds Banking Group PLC

Visit Lloyds Bank's website to find out more on what development finance they have to offer:

Specialist Banks & Peer-2-Peer Lenders

The next level of funding is from banks who specialise in property and development finance. These facilities typically start from £500,000 and you are looking at rates at around 7%-10% p.a. on money drawn down (plus associated fees). There are development lenders who would consider lower amounts in this bracket. The benefits about these lenders is that they are specialised in property development, can take more a commercial view on individual projects and are faster to deal with than high-street banks.

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Assetz Capital

To give you more of a flavour of what development lenders there are in this tier, you can visit Assetz Capital's website:

Specialist Private Lenders

The difference between specialist lenders and specialist banks is that "Banks" have a banking licence which means they can hold customer deposits (source of funds), whereas private lenders will have other funding lines, including private funds.

Loans are available from £50,000 and rates can range from 0.75% to 1.5% per month. It can depend on the location, size of the development and type of development for what rates you will be able to achieve. For example, Light Refurbishments are at a low rate than new builds.

The major benefit with working with specialist lenders is that they are much personal and flexible to deal with. As well as offering speed.

Affirmative Finance Logo

Affirmative Finance

One of the specialist development finance lenders in the market we deal with is Affirmative Finance. They provide fast & flexible funding for all types of property development projects.

We have access to all scopes of lenders with over 50 lenders on our panel from all tiers of Lenders. Please don't hesitate to contact us on 01244 956 740 if you would like to discuss this with us. 

Types of Loans Available

Residential & Commercial Bridging Loans

Bridging loans can be used in a variety of situations. They are designed to be fast and flexible and are can provide a solution when funds are required urgently.

Bridging loans can be used for Auction purchases, buying an asset quickly, leasehold extensions and short-term borrowing needed before sale of refinance.

Commercial bridging loans is loans for commercial property such as hotels and industrial units.

Bridging loans are a lot quicker than standard mortgages and the lender and there is less focus on income to determine how much you can borrow.  Interest and fees can be rolled up and paid on exit of the facility.

Property development loans

Property development loans can be for a range of situations. You have:

  • Light refurbishment loans where works required are minor such as refitting kitchens, decorating, etc.
  • Heavy refurbishment loans for conversion projects where works require permitted development or planning. An example project would be converting offices into residential units
  • New-build development loans for new build projects. These can range from 1 single dwelling to multiple flats or 100s of dwellings.

Funds can be provided towards purchase and build costs. Where build costs are typically released in arrears in pre-agreed stages with the lender.

Development Exit Loans

This product is designed for developers who have completed their development and want to refinance their development loan onto a cheaper rate loan. This will also give you more time to sell your completed sites.

Mezzanine Finance

Mezzanine finance is funding secured on a second legal charge by another lender. It is designed to bridge the gap between senior debt and equity. i.e. it’s a way of getting higher loan-to-values than provided by just one lender. Often you will get a blended rate and you can go up to 90% Loan-to-value and 90% Loan-to-Cost. Therefore, you will still be required to put in a minimum of 10% of total costs.

Buy to Let Loans

Buy to let loans are long-term loans on investment property where you are renting out the property. We have access to traditional lenders and specialist lenders who can provide a more flexible solution on the more unique cases. Residential and semi-commercial properties can be covered. We can find solutions for 1st time landlords, large portfolios, equity release, low yielding properties and much more.

What is property development finance?

Property development finance is short-term finance for property development which is secured with a first legal charge over the plot/property by the lender.

Property development finance is typically released in stages throughout the build in arrears; where you will only pay interest on the funds drawn down.

property development finance

Typically stages could be:

  1. Foundations / Damp-proof course (DPC)
  2. Wall plate
  3. Roof Completion
  4. First-fix
  5. Second-fix
  6. Completion

Happy to help...

Looking for property development finance or is it a preliminary enquiry? Either way, give us a call to discuss further!

What do you need to make an application and what is the process?

For indicative rates, we just need the basic numbers and details of the project and yourself. We will require the following information for a full application:

  • Purchase price or current value of property/land if owned
  • Build costs (preferably with a breakdown of these costs)
  • Gross Development Value (Estimated end value of total project)
  • Site Address
  • What the project is? E.g. New build of 3x4 bed detached houses
  • Build term/timescales of project
  • Summary of relevant experience (CV/projects worked on)
  • Loan facility required
  • Copy of planning permission/reference (if planning is required)
  • Building regulations (if required)
  • Details of any planning restrictions, stamp duty or Section 106s
  • Details of relevant professionals e.g. solicitor/architect/main contrac
    tor

What is the process?

Initial Enquiry:

If you require funds for your development or property project, please contact us to discuss funding options and we’ll let you know immediately if we think we could help and roughly what rates and loan-to-values you’ll be looking at.

Quotes:

We will then look to search the market for the best offers available from the lenders in the market and send you indicative terms via email outlining the loan facility.

Agreement in Principle:

If one of these quotes is of interest to you, we will take you through the application process and get you an “Agreement in Principle”. This is an offer subject to several standard conditions like the valuation and legal process.

Valuation

The lender will send out a surveyor to conduct a valuation on the land/property and go through the project with you. On larger projects a lender often requires a valuer and quantity surveyor to attend the site.

Offer / Legal Process:

Once the valuation has been satisfied, both parties will need to be represented by a solicitor to go through the legal process to reach a final offer. It is important you to instruct a solicitor who deals with conveyancing to save you headaches.

Completion:

This is when the final offer has been signed and the lender has registered a first legal charge on the property. This is when funds are sent to your solicitor and the loan term starts. On development loans this is often the first instalment of multiple stages; subsequent funds can be sent to yourself directly.