Development Finance.
Structured funding for property developers, from land purchase to exit.
Development finance is specialist funding designed to support property developers through every stage of a project — from acquiring the site to covering build costs and, ultimately, exiting via sale or refinance.
It can be used for residential, commercial and mixed-use schemes, light or heavy refurbishments, conversions, new builds and everything from single units to large multi-unit developments.
Types of development finance we arrange
- 01Residential property development
- 02Commercial and semi-commercial development
- 03Renovations, conversions and refurbishments
- 04Ground-up new builds
- 05Single unit developments through to large multi-unit schemes
- 06Development exit / sales period funding — similar to a bridging loan, used once a development is complete while units are being sold
- 07Regulated development finance — used where a regulated facility is required
- 08Mezzanine development finance
Types of development project
Different lenders define light and heavy works in their own way, but in general:
- 01Light refurbishment — mainly aesthetic changes such as new kitchens, bathrooms, windows and central heating
- 02Heavy refurbishment or renovation — structural work such as new plumbing and electrics, moving internal walls, partial demolition and rebuild, extensions, loft conversions, or converting a property into flats
- 03Ground-up development — funding the land purchase and the build costs from the outset
How much can I borrow?
Most lenders will fund up to 70% of the land/site cost and 100% of the build cost, provided total borrowing stays within around 70% of the gross development value (GDV). Higher LTV options (up to 70% of land and 100% of build) are available through specialist lenders, but typically come with higher rates and stricter underwriting.
For the best terms, restricting borrowing to 60% of the land cost and 100% of the build cost is a sensible rule of thumb.
- 01Land or site costs
- 02Development and build costs
- 03Lender fees — arrangement and exit
- 04Professional costs — solicitors, surveyors and QS monitoring
- 05Contingency budget
An example of ground-up development finance
A plot of land with planning for four three-bedroom detached houses is available for £250,000. Build costs for all four are £400,000. Each finished house is valued at £250,000, giving a Gross Development Value of £1,000,000.
Development finance can cover up to 70% of the land cost (£175,000) and 100% of the build cost — a total facility of £575,000. The initial drawdown of £175,000 helps fund the land purchase, and the remaining £400,000 is released in stages as the build progresses. With most facilities, interest is only charged on funds that have actually been drawn.
The development finance process
- 01Enquiry and free initial advice
- 02Agreement in principle with indicative terms
- 03Development site visit
- 04Valuation
- 05Formal loan offer
- 06Solicitors and legals
- 07Completion and first drawdown
- 08Staged drawdowns to fund build costs
- 09Redemption — usually when the development is sold or refinanced
Do I have to make monthly interest payments?
Most development facilities allow monthly interest charges to be added to the loan and repaid on redemption. This takes pressure off the developer during the build, when there's typically no regular income coming in. If units are sold during the project, proceeds can be used to reduce the balance.
How to repay your development finance
Every lender will want to see a clear exit plan before agreeing the loan. The most common exits are:
- 01Sale of the finished property or site
- 02Refinancing onto a developer exit product at a lower rate
- 03Long-term refinancing — especially if you plan to rent out the completed units
- 04A combination of build-to-sell and build-to-rent
Development exit finance
Development exit finance lets you repay a development loan before the units have been sold. It's often cheaper than the original facility, can buy time if your current loan term is ending, and can free up capital so you can move on to the next project. Exit finance is typically a short-term, lower-cost bridging loan.
Why use development finance?
- 01Take on larger projects than you could self-fund, increasing potential profit
- 02Avoid tying up significant cash until the project sells
- 03Run multiple projects in parallel rather than waiting for one to complete
- 04Boost your return on invested capital by using leverage sensibly
Ready to explore
development finance?
Speak to a qualified UK mortgage advisor today — tailored, transparent and whole-of-market.
FCA Reference Number: 953250