Can I Get 100% Development Finance?
The demand for quality land in the UK has never been this higher. We all know that good quality land that is either likely to be granted planning permission or has had planning permission granted, can be worth millions. Once that land has been developed it is worth even more, and that is easy for property developers to see if they just take a look at the share prices of the UK largest house building companies. It has much to do with the government’s flagship schemes, but with the announcement of its extensions and now a mortgage backed and guaranteed by government, that premium for new build properties and developed properties in general, is unlikely to abate soon.
As a property finance broker in the UK, we have been receiving a large number of enquiries about 100% development finance, and development finance more generally. Development finance when done correctly is a highly profitable business, however most can’t afford to do it all with their own money and so most will often need to raise some capital through development finance. That is where we help our clients and give them access to our excess panel of lenders that are able to provide great deals, including 100% development finance.
Property development finance is a short-term property loan with an extended six to eighteen months’ time frame. It helps developers to fund their projects. You can get property development finance in the UK for commercial, residential, and mixed-projects that include new builds, conversions, and heavy refurbishments. These are some of the main reasons developers require development finance.
How Does IT WORK?
Development finance is more technical than a standard mortgage, with advanced funds upfront and then throughout the build. Funds are drawn depending upon the site’s value; in most cases, day 1 drawdown can be up to 60-65% of the loan amount.
Once the work has begun, funds are released based on pre-agreed milestones, with lenders willing to advance up to 100% of the new-build costs in some cases. To agree to each stage, the site will be surveyed by the lender. If the works are proceeding as planned, and there is sufficient value added on-site, the next stage of funds will be released.
Can One Get 100% Development Finance?
This could be possible, although most property development finance providers cap the amount they will lend based on the project gross development value. It means how much it will be worth on the open market. There are few circumstances where this rule doesn’t apply.
Most of the lenders will offer 70% of the funds they need for the initial site purchase and 100% of the development cost, released in staged drawdowns (usually on the site inspection) as the site work progresses. For 70% of the funds, you will have to show a track record in development finance. Otherwise, if it is your first development project, the lender will usually require you to contribute half of the amount towards the purchase of the land.
There are two ways you can convince lenders to offer 100% development finance by putting up additional security or entering a joint venture agreement.
Speak to an expert about your project and seal the deal!