Development finance

What is development finance?

Development finance refers to a category of short-term lending aimed at helping property developers or companies who are looking for a loan to help cover the costs of renovating or refurbishing a property. Proper Finance is able to find you the right lender, whether it is for making changes to a new build or an existing property, helping you to cover costs regarding construction as well as purchasing the building in the first place.

Residential property development finance

If you are looking for funding for a single residential build, or perhaps a large-scale development complex, Proper Finance can help you find the funding to refurbish or buy buildings for residential purposes. We can help with construction costs or purchasing for a single flat, house, mansion or a block of flats.

Commercial property development finance

Are you intending to renovate or buy commercial property, such as shops, vacant land, offices or farms? No problem, Proper Finance can help you with this too! We can help you find funding to help with things such as fixtures and fittings and work with a number of experienced reputable lenders.

New build finance

Perhaps you are going to be building a new estate after having purchased a plot of vacant land, or are going to knock down a building in order to start anew. Proper Finance works with new build finance lenders too to help you get the project off the ground. There are also a number of new build schemes across the country, created by local councils and banks, helping you to get funding. For example, an equity loan or a guarantor loan.

How much can I borrow?

The exact amount that you will be able to borrow with property development finance through Proper Finance will depend on a number of factors. First of all, it depends on the lender. The loan amount will also be calculated on gross development value (known as GDV) as well as what the property is estimated to be worth once renovations have been carried out. Some lenders Proper Finance works with can offer a 60% maximum loan to GDV, rising to 75% in terms of maximum total costs.

As a rule of thumb, development finance lenders can help cover all the build costs incurred and a percentage of land costs. For example, a developer may have planning permission to build two houses estimated at £5 million (gross development value). The overall costs are £3 million, calculated as £1.5 million for building costs and the rest for purchasing the land. In this scenario, one of our lenders may agree to fund £3.75 million of this amount (capped to 75% of costs) with an initial £400,000 advance given, and then the rest of the balance is granted in stages through the build. Source: Magnet Capital

In the majority of cases, funds are not sent in one lump sum when it comes to property development finance but rather sent in stages according to quantity surveyor and architect certifications.

What are the costs of development finance?

Unless a formal offer letter has been given to you, you will not have to pay any costs. If you accept the offer, there will be a ‘commitment fee’ that is around 2% of the total amount you have borrowed. Depending on the circumstances, there may also be a small broker fee to, averaging at 2%. You may also need to take into consideration fees by your own surveyor and solicitor too when it comes to evaluating the property.

When it comes to interest rates, lenders will start at 6.0% per year, and the exact amount depends on the GDV, security and other factors. You have the option of paying the loan and interest back each month, or ‘roll up’ the accrued interest so you can make payments in full once the project has been completed and sold. In the latter case, the interest is compounded so it would be slightly higher in interest rate costs than if you decided to pay on a monthly basis, which is something to bear in mind.

How can I apply for development finance with Proper Finance?

Proper Finance works with a variety of reputable development finance lenders and bridging lenders and providers, helping you to narrow down which one would be best for you in your individual circumstances. All you need to do to apply, is click apply now and fill out an application form. Once you have made your enquiry, a member of our team will swiftly get in contact with you to discuss things further about your plans for development. At this point, we may be able to provide you approval in principle which can take as little as 24 hours. In terms of what we can provide finance for, this includes the following:

  • Residential property
  • Commercial property
  • Renovations
  • Extensions
  • Conversions
  • New Builds
  • Part builds

So what are you waiting for? Apply with us today! We look forward to helping realise your property development dreams.