DEVELOPMENT FINANCE

Unlike a traditional mortgage which is often used to finance an existing property or home purchase, development finance is structured to fund the development of new builds or the significant renovation of existing properties. It usually involves drawdowns of funds in stages as the project progresses.

Typically, individuals or businesses like property developers, builders, or companies looking to develop a property project can apply for development finance.

Projects that are eligible include new residential developments, commercial property constructions, renovation of existing buildings, residential conversions, and property expansions or improvements.

You will need to provide a comprehensive proposal that includes a business plan, detailed costings, projected cash flow, the value of the property upon completion (Gross Development Value), planning permissions, and a realistic timeline for the project.

The amount you can borrow largely depends on the lender’s policy but typically ranges between 70% and 80% of the total development costs, including the land purchase. For some more substantial projects, it may be possible to borrow up to 90% of the cost.

Interest rates for development finance can vary widely based on the project's risk profile, the experience of the developer, the loan amount, and the term of the loan. Rates are often higher than residential mortgages due to the nature of the product and the higher risks involved.

The time it takes to secure development finance can vary, but it's usually faster than securing a traditional mortgage because of the time-sensitive nature of development projects. It could take anywhere from a few weeks to a few months.

Yes, development finance can typically cover both the land purchase and the construction costs, subject to the lender's loan-to-cost and loan-to-value ratios.

It is commonly repaid through the sale of the developed property or refinancing into a more permanent structure like a traditional mortgage after the development is completed and has reached its full value.

Remember that the information provided here is general and you should consult a financial advisor or lender for advice tailored to your specific circumstances.