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All about Property Development Funding in the UK
Property Development Funding is a type of finance offered to property developers used to fund the refurbishment or development of new build properties, this type of finance is offered to property developers by financial institutions such as banks and private companies who offer finance using investors money to offer a better return than they would get on deposit, basically they pool money from private investors and then use the capital to fund property developments offering a far greater return, these private lenders can offer more attractive terms a higher loan to value and generally a better more flexible service, whereas a bank is ticking boxes private lenders can take a far more relaxed view on the projects they are looking to offer to fund on.
Each lender has their own particular preferences it could be different locations in the country based on where they are located as they know the market well regarding what sells well or types of property that they like to lend on this could executive properties, family housing or even commercial development with a mix of residential thrown in, most through prefer to offer funding on residential developments as they a confident that buyers can be found for the finished properties, if you have a commercial scheme you will have to demonstrate that you have a buyer firmly in place or at the very least a lease agreement for at least 10 years from a strong covenant, this will allow the property to be sold on as an investment, lenders do not like to lend on commercial property that is vacant.
Property development Funding what costs are involved?
Basically, the costs involved in development funding are as follows
Arrangement fees are what a lender charges for arranging your funding these are around 1-2% and all lenders will charge an arrangement fee.
Exit fees these are usually charged by high street banks, not private lenders, they will charge a fixed amount based on the end value of the properties, this will be in the range of 1-2 % of the GDV. Private lenders only charge an arrangement fee.
Valuation fees all lenders will charge a valuation fee, this is for a surveyor to go over all of the costs that are to be funded, building costs, professional fees, architects fees and everything else that you will be spending on the project, a surveyor will be appointed to cover these items and value the land/site and tell the lender the end value of the properties.
Legal fees, you will have to pay for the lender's legal fees as well as your own. The lender will tell you what their legal fees are before you enter into a full application.
Interest rates these will be quoted as a yearly interest rate you will not be expected to pay interest on a monthly basis it will be deducted from the sales proceeds when you redeem the loan, you will only be charged interest for the actual days that the loan is outstanding.
Who can apply for Residential Development Funding
As long as your project stacks up and the resales show a healthy profit of at least 20% of the end value you can apply for funding, even if you have little or no experience lenders will look at your proposition.
What you can do now?
Get in touch you can call us anytime 24/7 or fill in the form on this web page and we will contact you to provide your quote.
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