Guides to UK Development Finance
Guide to UK Development finance can be the best option for borrowing to build a new property or convert a unit - whether for residential or commercial use.
Revolution Brokers negotiates property development finance for a vast range of clients:
• Experienced property developers and building firms.
• Professional builders who construct their own properties on parcels of land and sell them at a profit.
• Developers who haven't built anything from scratch before.
• Self-build applicants who want to develop a primary residence.
Generally, you can borrow up to around 50% to 60% of the land cost or the property that you plan to convert. Lenders are far more likely to approve an application if the site has planning permission. In other cases, they will offer to lend, subject to approval being secured.
In terms of the build costs, provided the total budget is within 60% to 70% of the gross development value (GDV), applicants can borrow up to 100%.
Property development finance tends to run on a shorter term, usually between one and three years as a maximum. The lender will need to know how you plan to repay the debt after the period ends, generally selling the development or taking out longer-term refinancing.
What are the Benefits of Bridging Finance for Property Development?
There are several reasons a property development finance loan might be the optimal borrowing for your conversion or build project:
- Many lenders will accept early repayments without charging a penalty.
- Inexperienced or first-time developers are eligible to apply provided they can provide contact details with a building contractor.
- Loan values start from £25,000 and above.
- Staged payments are aligned with critical points in the development, and interest is only charged on the amount of the facility drawdown to date.
- Other properties or assets can be used as security against the loan.
- If the development goes above or below the planned budget, there is no requirement to borrow the total amount agreed.
One of the few downsides is that the valuation will often take longer, given the unique nature of a development project. Rates are also dependent on the nature of the property and your experience in similar constructions or renovations.
Property development finance is a great way to secure the borrowing you need if the development site isn't eligible for other kinds of lending - for example, a derelict building that isn't a habitable property.
You can borrow as much as you need to, usually up to 100% of the construction costs.
However, note that bridging finance for developments is only a short-term borrowing project, intended to 'bridge' the time between your need to invest in purchase or development costs and the time when that property will be eligible for a longer-term mortgage.
Therefore, you must have a clear exit strategy to show your lender how you expect to repay the loan - typically by selling the property or refinancing onto a residential or commercial mortgage product.
