Probably the Lowest Rates in the UK
We have access to the best rates for development finance enabling us to deliver affordable and quick UK Property Finance.
- 90% loan to cost & or 75% loan to GDV
- Borrowing from £25,000 to £100,000,000
- New-builds & conversions
- Single-units or multi-unit projects
- Houses, flats, property with a commercial element
- Change of use
- Developers of all experiences, including first time buyers
- Regulated & unregulated products
- Acquisition & completion of partially built developments
- Mezzanine & joint venture
- 100% of the build costs & up to 70% land cost on day 1
- Joint venture possibilities
- Loans from £25,000 upwards
- No tie-ins. In most instances you can repay the loan without incurring any early repayment charges
- No experience is required provided a building contractors contract has been provided
- Funds are available in stage payments and interest charged only on the money drawn
- Can use other properties as collateral
- You are not liable to borrow the full agreed amount should your build go below budget/plan
With property development finance the valuations tend to be higher than standard valuations and take longer to perform.
Development loan rates will vary depending on the project and experience.
The biggest benefit of development finance is the way in which it allows borrowers to access much larger sums of money. In fact, it is the most extensive borrowing facility currently available on the UK market.
Initially, funds are provided to get the project underway. As the project continues, grows and edges closer to reaching its goals, more money is released for the developer along the way. The total sum of money lent can be up to 100% of the total cost of construction, with no specific upper-limits as to how much can be borrowed.
Additional advantages include:
- The ability to secure money on properties, plots and developments that may be considered unsuitable or unviable by other lenders. This includes rundown and derelict buildings.
- Development finance can be repaid relatively quickly, keeping overall borrowing costs to absolute minimums. Far more affordable than many long-term borrowing facilities.
- Interest is only charged on the funds released which again can impact the overall costs of the facility in a positive way. A benefit of funds being released in stages throughout the project.
- No specific limitations on how much can be borrowed. If the project is deemed viable, loans may be offered to cover up to 100% of the costs, irrespective of the total construction cost.
What Are the Main Costs?
Fees, charges and general borrowing costs vary significantly from one lender to the next. The following will apply in most instances as the primary costs:
Facility fee – More commonly referred to as an arrangement fee, the facility fee is calculated as a percentage of the total cost of the loan (gross or net).
Interest rate – Interest on development loans can be charged on an annual or monthly basis. Annual interest rates of 7% are not uncommon, as are monthly interest rates of 1%.
Exit fee – Sometimes called a completion fee, the exit fee is usually calculated as a percentage of the total cost of the loan (gross or net). Some lenders charge a percentage of the total value of the completed project, not the sum borrowed.
Broker fee – Some brokers offer their services free of charge for customers as they receive commissions from lenders upon successfully referring customers. Some brokers impose a fixed fee for their services or charge a percentage of the total value of the loan.
These are just some of the primary costs. Working with an independent broker will help ensure you gain access to the best possible deal to suit both your requirements and your budget.
At UK Property Finance, we usually do not charge a penny for the services we provide. No brokerage fees for borrowers and no ties, just the honest and impartial advice you need to make the right decision.
If a fee is charged, you will be informed of this in our initial quotation.
Other costs may include:
Valuation fees – It will usually be necessary for an initial valuation to be carried out by a neutral third party, in order to assess the open market value of the security. This will also typically include a projected valuation of the completed project.
Application fees – UK Property Finance does not charge application fees. Some lenders and brokers impose fees simply for submitting an initial application, or seeking advice.
Legal fees – If it becomes necessary to hire a solicitor or seek qualified legal advice, the applicant will be responsible for meeting all such costs accordingly.
Administration fees – This is a somewhat vague term, which can apply to almost any additional cost imposed by the lender. Some brokers also charge administration fees, UK Property Finance does not.
Monitoring fees – Lenders will naturally need to monitor the progress of the project in order to ensure it is reaching its predetermined goals. This is to make sure their investment is secure and the funds allocated are being used as agreed. All monitoring fees are picked up by the borrower.
Draw down fees – Each time a new instalment of funds is transferred to the borrower, an additional fee known as a draw down fee may apply. This could be a set fee or charged in accordance with the size of the instalment.
Telegraphic Transfer fee (TT Fee) – This is a cost imposed by the banks handling the money transfers, which in the case of development finance, can be comparatively large. Nevertheless, TT fees are generally quite small and charged at a fixed rate.
Development finance is always tailored to the requirements of the borrower and the specifics of the project. There are several key stages that remain relatively constant, which are as follows:
- Initial enquiry and obligation-free consultation
- Comparison of deals from specialist UK lenders
- Submission of initial application to suitable lenders
- Agreement in principle issued to the borrower
- Site visit to establish the project’s viability
- Independent valuation of the project’s total value
- Formal loan offer and final terms
- Solicitor involvement for legal support and advice
- Completion of the loan and first payment (drawdown)
- On-going instalments to fund the project
- Repayment of the loan as agreed at a later date
How Development Loans are repaid
Interest is usually added to the loan on a monthly basis, hence advisable to repay a development loan at the earliest possible stage, in order to minimise overall borrowing costs.
In most instances the total balance of a loan is repaid through refinance or sale of the property:
- Build to sell – This applies when the developer completes a project with the intention to sell it (in full or in part) to cover the costs of the loan.
- Build to rent – This applies when a longer-term borrowing facility is used to repay the initial loan, while enabling the developer to retain ownership of the property to rent it out.
- A combined approach – This applies when the development is partially sold off upon completion, though a proportion is retained by the developer to be rented out.
Development Exit Finance
Some developers use developer exit finance to pay off debts prior to selling the development after its completion. The benefits of development exit finance include:
- Increasing profits and cutting costs, as exit finance can be a cheaper at this stage.
- Bridging gaps between completion and sale, as the current loan term may come to an end before the sale is completed.
- Freeing up capital at an earlier date, enabling developers to get started on their next projects before completion of the sale.
By definition, exit finance is a specialist type of bridging loan, offered with a low rate of interest and short-term lending facility.