Interest roll up – no need to worry about monthly payments

There are different types of Development Finance, and the suitable product is dependent on the project. For this reason, we recommend getting in touch with one of our expert financial advisors who will quickly be able to assess your needs and find the best product for your venture.

 
Development finance is typically released as two parts, the first part is released as lump sum to purchase the site, and the second part is released in stages to finance the necessary works.

 
Dependent on the lender and circumstances of the project, but can be up to 70% of the gross development value.

Interest rates vary depending on multiple factors such as development experience as well as credit scoring factors, but typically range from about 0.85 to 1.1%.

After the initial application is submitted, the lender will send out a monitoring surveyor to have a chat with you (or your project manager) to go over your schedule of works and costs involved. 

This discussion will be to determine the scheduling of funding to ensure your project can be completed as efficiently as possible.

 Once this has been agreed, an assessment of the current value of the plot/property will be carried out as well as a calculation of what the plot/property will be worth once the works have been completed.

 This figure (GDV) is the amount your loan will be based on.

Gross development value (GDV) is a valuation metric that most property developers and investors will be familiar with when calculating financial returns on property development projects. 

The Gross development value of property investment projects is an estimate of the final value of that property once the planned development works have been completed.

Lenders will use the Gross Development Value to calculate the maximum amount they’re prepared to lend. 

This could enable you to secure a property at a lower price, and use the extra amount loaned to complete the necessary works which subsequently increase the property value at the point of refinancing.

A unique benefit of development finance is the way in which interest is paid, or serviced, by the borrower. Unlike a traditional mortgage or loan where a borrower makes a monthly interest payment, most Development Finance lenders will add the interest to the loan, meaning that the borrower will not have to make any payments to the lender for the first 12 or 24 months. 

You will also only pay interest for the period of time that the funds were borrowed, so early repayment of the loan would result in a reduction in the amount of interest paid.

 
When the property is sold or refinanced, the original Development Finance plus any accrued interest will be payable in one lump sum from the proceeds. This helps with short term cash flow, meaning you will not need to worry about budgeting for monthly repayments whilst you await your permanent finance solution or property sale.

Both Bridging and Development Finance are short term loans.

However, Development Finance - unlike Bridging Finance which is paid out to you in one lump sum - is often paid in installments, in line with your schedule of works. 

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There are different types of Development Finance. Firstly, there is Self Build finance, this would be applicable to personal projects such as building your own property.

 Then there is Development Finance, which is used for investment and commercial purposes, for example, if your intention is to sell or let the completed project.

Once the type of finance for your project is determined, your broker will assess which product is best suited to your project.