QUESTIONS AND ANSWERS

What can you use a development loan for?
Development finance can be used for a broad range of projects from refurbishing an individual residential unit all the way up to housing estate or block of flats.

How much can I borrow for development?
You can borrow up to 75% of asset value and 100% of build costs.

How much can I borrow against land with planning?
50% of the lands value is readily available for borrowing and is a good number to start from, however if the application is strong enough this can increase to as much as 75%.

What’s the interest rate going to be?
Interest rates start from as low as 5.75%pa but most deals are usually around 10%.

Is there an arrangement fee and exit?
Most lenders charge a 2% arrangement which is normally shared with the broker. Not all lenders charge exit fees but where they do there is sometimes scope for negotiation.

How much will the development broker charge?
We normally expect to charge a minimum of 1% of the amount borrowed which is usually paid from the lenders arrangement fee. 

How do I repay my development loan?
There are a number of routes to pay back your funding. During the project you should be marketing the property for sale or rent. If you are hoping to sell the finished property and need more time for marketing then it maybe advisable to replace your development finance with a Post Development product. This is a short term loan with minimal fees normally for no more than two years, with the average rate around 7.5%. If you are going to keep the properties then as the project comes towards its completion you should be organising buy-to-let finance.