How Do I Apply For Development Finance?
Understanding exactly how it works is significant for starting on development project plans.
Many borrowers stumble at the application processing stage when trying to get finance for property development. Managing a property development project is a daunting task, and it’s likely to become more challenging if one is not highly experienced. But with professional advice, there are still great opportunities ahead for borrowers. At Finspace Group, we will discuss what lenders are looking for in an application and reveal how borrowers can elevate their chances of getting the best possible terms by presenting their projects in the best possible way.
How Can One Apply For Property Development Finance
How Can One Apply For Property Development Finance
Finance for property development works differently from traditional mortgages. Often, lenders evaluate the property’s value and then offer a fund based on that and the borrower’s eligibility. For property development finance, lenders look at the Gross Development Value.
To apply for development finance, developers must submit an application that includes details of how much they paid for the land, the project development cost, professional fees, building timescales and their eventual sale price. Based on the information, the client is offered a list of terms from the lender that they need to be agreed upon before proceeding to a credit check. A bad credit rating will negatively affect an application, so borrowers need to make sure they’ve double-checked it before they apply.
Even once the loan has been approved, the borrower will still be scrutinized throughout the project. It’s also imperative to keep in mind that the interest paid on loan will be discussed with the lender during the application processing, so it can be difficult to estimate the final cost until later on in the application.
Nailing the Application Process
Documentation
Once you have found the finance for your development project:
- Developer CV
- Development appraisal
- Schedule
- Amount and source of equity
- Asset and Liabilities record
You need to submit all the professional qualifications documents and previous development history. This development appraisal is a prime tool for lenders to assess the land value of applicant property, a detailed list of properties with prices, a list of personal assets and liabilities, and all the relevant supporting documentation
Valuer and QS
Once the lender has obtained all of the above documents, they will confirm credit-backed conditions and instruct their Quantity Surveyor (QS) and valuer. You will need to account for these costs up front and agree to cover the cost even if the loan does not complete.
The valuer will:
The valuer will:
- verify site value and suitability as a security
- Run a high-level check on the building value
- Confirm the GDV of the end units
- Provide an evaluation report within ten days
Approval
Once the lender is satisfied with the completed evaluation and QS reports and the lender’s solicitor is content, funds for property development will be sent to the borrower’s solicitor to complete the loan. The current industry standard is between 5 and 6 months to complete property development finance.
If you’re thinking about applying for finance for property development, then it’s better to take the help of a broker. With a broker, you can have greater clarity regarding how much your loan will cost and which arrangement best suits your project needs.
