Property developers could look to construct new build houses, convert existing buildings or simply renovate tired properties. Development finance lenders will have specific types of development finance, each structured to cater for the requirements of the project type.
Ground Up Development Finance
Perhaps the most common type of development finance we think of is for the building of new houses or apartments. This facility is secured against the land which would generally have planning permission in place. The lending is structured as a land loan and build facility. The land loan offers the developer funds to acquire the land and the build facility provides staged loan draw downs to enable the build.
Senior Debt
A lending facility that takes the first charge on the land and offers an initial loan plus a build facility. The leverage is usually available up to 65% of total costs and 55% of the gross development value.
Stretch Senior Debt
This funding is the same as senior debt, but the leverage is higher. Often a good solution for developers with limited funds who wish to maximise their return on equity. Stretch senior lending is generally up to 90% of total costs and 75% of the gross development value.
Mezzanine Finance
Like a second charge loan, this lending sits behind senior debt lending to maximise the total borrowing. This finance is typically available to 75% Loan to GDV and costs in the region of 15 – 25% per annum.
Heavy & Light Refurbishment finance
These loans are like senior debt loans for existing buildings rather than new-build construction. Lenders can be more aggressive on leverage here as conversions are perceived to carry less risk.
Calculating the cost of development finance
Working out the true cost of a development loan can be tricky. For that reason, we have created a development finance calculator to help you work out the costs.
If you wish to discuss funding projects, then please do get in touch. Our team is always happy to assist.
