DEVELOPMENT FINANCE

What is development finance?

Development finance is a short-term funding option, usually for between 6-24 months.

It is designed to assist with property purchase costs (e.g. to purchase the land on which several new properties will be built or an existing property that will undergo a refurbishment) as well as the build costs associated with a residential or commercial development project (this is usually funded or drawn down in specific stages, as opposed to being given in one full amount at the outset). The drawdowns are usually done in arrears and are available as soon as certain, specified milestones are completed on the project.

What are development finance terms?

Most development loans will be for a period of up to 24 months, but this will be dependent on the nature and complexity of the project being funded. The term of the loan will allow time for the property to be purchased, developed, and then sold or refinanced to repay the debt.

How much deposit is needed for a development finance loan?

This is highly dependent on the lender and their lending criteria. For development finance loans you may be looking at a maximum of 65% to 75% loan to value with 100% of the build costs being funded. Each project will be assessed individually and will depend on certain parameters such as current value i.e., the value of the site with planning or the value of the property before refurbishment, the build costs and most importantly the value of the completed property or properties, once all the building works have been completed (known as the Gross Development Value or GDV). The funding for each project will be structured in such a way to ensure there is enough money in place to complete the build in its entirety.