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There are many obvious advantages when it comes to utilising property development finance to fund a project. Even if you have the amount of cash needed already available, it is worth looking at the benefits of a development loan for at least part of the project.
When looking for property development finance it is important to identify the type of project being planned by the developer in order to access the correct funding product. Types of works can include:
New builds nearly always require development finance loans. Once the project is completed, developers may use development exit finance as a more cost effective solution, but this cannot be done before the project is watertight.
To accommodate this type of project refurbishment finance is typically the correct type of loan to use, however if the project is larger than the norm, development finance may be a better alternative.
A refurbishment loan is a type of bridging finance generally used for property renovations. It can be used for various improvements including, installing a new roof, general structural changes, building an extension, refurbishment, and decoration.
Property investors or developers may want to buy property which needs development or completion work still doing and are unable to get funding from their bank. This is a typical scenario when a bridging loan is a suitable alternative.
Development finance loans are typically paid in one of the following three ways:
The total loan amount is paid in full, using the profits, when the project is complete, and the properties have been sold.
This usually happens when the developer wants to keep the development for either personal use or for rental purposes.
This type of short term loan is often used to fund a new development project before the current project is sold. It can also be used to give developers a bit of breathing space to complete minor works and find buyers.
If you have your land secured and a have a fair idea of the costs involved and the end values, then it is time to give us a call to discuss your development project. During the call we will explore your finance needs and discuss with you the best finance products to suit your plans.
We will require the following:
There are 7 stages from initial enquiry to completion when applying for a development loan:
The amount will differ depending on the type of development project. Once we have identified what funds you will need we will structure your finance to meet your requirements.
It is important to factor in any additional costs when taking out finance. Costs and fees to take into account include:
Complying with building regulations and getting the relevant planning permissions is of the utmost importance. Building Regulation Approval can be granted through your Local Authority Building Control Service. You are entirely responsible for complying with building regulations if you are doing the build yourself. If you are employing a building contractor then the responsibility will generally fall on them, but ultimately the owner is responsible and may be served with enforcement notices if there are any regulations not adhered to.
Yes you will need planning permission for your development project.
At each stage of the development, you will need professional checks to ensure that all building regulations have been adhered to and works have been completed to an expected standard. This is typically done by your architect or through the NHBC.
NHBC stands for National House-Building Council. The NHBC is an independent provider of insurance and warranties for new homes.
A fixed price contract refers to a contract with your builder that fixes the costs that you will pay and will not change, even in the event of additional or unexpected costs. This can prove to be beneficial for both the builder and the developer as the builder will be able to charge higher fees, whereas the investor will know exactly what the costs are giving total peace of mind. Lenders are also more likely to lend for projects that have fixed term contracts.
Having access to funds for property development purposes allows borrowers to take on bigger projects than they would usually be in a position to finance.
The purpose of the facility is to provide the developer with additional time to sell their completed development, while keeping costs as low as possible.
Qualifying for finance as a first-time developer can be challenging. This is why it is advised to seek support of an independent broker at the earliest stage.
Our products are suitable for large and small hotel development projects of all types, from repurposing existing properties to building new hotels from scratch.
Joint venture development finance works in a similar way to conventional development finance. However, no deposit needs to be paid and rates are typically higher.
Mezzanine finance, aka mezzanine funding, effectively enables property developers to 'top up' their first-charge development finance facility to access extra funding.
No Personal Guarantee (PG) development loans are effectively a form of unsecured funding for major property development and construction projects.
Whether your goal is to maximise the value of a property you plan to sell or to boost rental income long-term, a refurbishment finance loan could be just the thing.
Senior debt development finance is the primary source of funds in the form of a first-charge loan. It is considered a lower-risk facility on the part of the lender.
Stretched development finance can be the perfect choice for investors and developers looking to stretch their own equity as far as possible with borrowing for up to 90%.
'Light refurbishment' is used for cosmetic upgrades and minor improvements. 'Heavy refurbishment' is used to raise funds for structural improvements.
Commercial property development finance can be used to fund, build or develop a property or be used to expand your current business property or space.