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What Is A Development Loan? A development loan is a loan for the development of property, it is used to finance the costs associated with the development and released in stages as the project progresses unlike a normal loan which would be paid to you on day one, the problem with this is that you would then be paying interest for the whole loan amount when it was sitting in your bank account, property development loans are a specialist financial product that is tailored to the cash flow needs of the project this means you are only ever paying interest on the loan amount that you have drawn at any one time, interest rates can eat into your profit so nearly all developers opt for a development loan.


The way it works is that on the first drawdown you just take the amount of cash that you require for the land or site that you are purchasing, all of the next payments are taken at predetermined stages of the development that you have previously agreed with the lender, this would normally be when you get the slab in or at DPC stage, then again when you are ready for the roof, another one when the roof is complete, you would then move on to first fix stage and then another one at second fix  and the final one when the property is completed, although some developers prefer to have the payments on a monthly basis on the completed works.


The payments on your property development loan will need to be approved by the lenders Quantity Surveyor who meet you on site to sign off the amount you are looking to drawdown. You would have to work out which method would suit you construction program and pre-agree this with the lender and qs, both options are normally acceptable, once the valuation is complete you can expect to be in funds within 24 hours of the surveyor's certificate



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What Is A Development Loan? How Do Property Development Loans Work?