What is Development Finance? Simply, it is a loan used for property development, such as building a property that will be rented out or sold when completed. The purpose of acquiring a development finance loan is typically for restoration, new builds, and a complete overhaul of commercial space.
Lending terms can vary but are usually for a brief period, up to three years. Interest rates can also be higher than a typical residential loan, and if granted a lender will also expect to visit the site at various stages at the expense of the borrower. There will be a requirement for an exit strategy.
If you are a budding property developer and need finance. How do you get it? Good question! There is quite a bit to organize before embarking on an application for development finance.
A lender will expect to see a business plan for the development, and your exit strategy will need to be included in this. The plan should detail the reasons for development, timescales, and any planning considerations.
You should also outline any relevant experience in the commercial property space, for example, if you have been a landlord or managed any properties.
You should aim to equip yourself with a thorough understanding of your financial numbers in the business plan and be able to answer any question related to spending on materials and building resources.
You should also be able to demonstrate any commercial business activity through historical accounts, and credit history.
Speak to a Commercial Mortgage Broker
When it comes to Development Finance, we would suggest speaking to an experienced Commercial Mortgage Broker. As development is a tricky area, there are several obligations that you will need to fulfill if accepted for a loan by the lender.
However, to be accepted for a loan, you will need to meet the lending criteria by the lender, which can be time-consuming, and a little confusing for those not well versed in the lending space for development finance.
A Commercial Mortgage Broker will not only be able to offer advice for the above, but as they are not tied to a specific bank or building society, they will have access to a wide panel of lenders. In addition, they will take on a lot of the grunt work on your behalf, which not only saves you time but a lot of stress overall.
Would you like to discuss your mortgage options?
As independent mortgage brokers, we have access to comprehensive mortgage and insurance markets, giving competitive options and prices across residential and commercial products. Get in touch to see how we can assist.
Attention: Late repayments can cause you serious money problems. For help go to moneyhelper.org.uk