Property Development Finance

Calculate the cost of development finance by telling us how much you need to borrow in the fields below. Give us some additional information within our Deal Optimiser on the next page to allow us to negotiate the rate on your behalf.

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What is development finance?

Property development finance is designed to provide developers with the capital needed to construct a new building or convert an existing building. It is the most suitable type of property finance to fund a residential development, commercial premises, or industrial building.

Who can get development finance?

We are able to source a development loan regardless of whether you are an experienced developer or first-time builder, however the level of experience you have usually dictates the rate available to you.

How much can I borrow with a development loan?

The maximum you are able to borrow against the development is 70% of the of the purchase price depending on whether the project is a ground-up development or light refurbishment so you will need some capital in advance.

In addition to the development loan you require to fund the purchase, you can borrow up to 100% of the build cost. You will need to make sure the total loan does not exceed 70% of Gross Development Value (GDV).

Maximum development loan varies from lender to lender, so the benefit of using an intermediary like Propp is having access to a wide range of products. Our lenders offer loans from £250,000 to £50 million.

What is a usual development finance loan term?

The maximum period you can hold development finance is usually 36 months. Your exit strategy will usually be sale of the development or refinance.

How does a development loan work?

Unlike getting a standard mortgage to build a house, development finance lenders release a percentage of the funds at the beginning of the build to get the project underway. The remainder of the money is released in draw-downs as the project continues.

Interest is only charged on the funds that get released, so dependent on how the project progresses the overall costs of the facility could be much lower.

Another way in which property development finance is a good option is if you’re looking to borrow to fund a project that would be rejected by mainstream lenders, such as derelict or rundown properties.

How much does development finance cost?

The cost of development finance varies from lender to lender and your experience as a developer will impact the rate you have access to. Fees, charges and general costs are usually made up of;

  • Cost of Interest – Charged on either a monthly or annual basis.
  • Arrangement fee – Usually between 1% and 2% of the gross facility
  • Exit fee – The fee payable to close the facility. Usually 1%-2% of the total cost of the loan
  • Broker fee – There is usually a fee payable to the broker for searching for and arranging the development loan

Is development finance easy to get?

Providing you have development experience the main considerations from the lenders point of view are the assets you are able to offer as security and the feasibility of the project in terms of profitability. You’ll need planning permission and a statement of works before you start looking for a development loan.

What can you use development finance for?

Development finance can be used to fund the ground-up development, conversion or refurbishment of a residential development, commercial premises or industrial building.

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ALL PRODUCTS DISPLAYED ON THIS SITE ARE FOR UNREGULATED PRODUCTS ONLY. SHOULD YOU REQUIRE A REGULATED LOAN PLEASE CONTACT US. AS A MORTGAGE IS SECURED AGAINST YOUR PROPERTY IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.
COMMERCIAL MORTGAGES AND SOME FORMS OF BRIDGING, DEVELOPMENT AND BUY TO LET FINANCE ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

* Total savings achieved since November 2020 based on annualised interest rate saving where deal optimiser service negotiated a lower rate than lender’s published rate.