Development Project with No Deposit
Funding a development project often means coming up with money you simply do not have, both in terms of the finances to fund the project and the deposit to secure the loan you need; you may struggle to come up with both.
Can I Fund a Development Project with No Deposit?
In such instances it is possible to secure development finance or a redevelopment loan with no deposit payable. If you cannot (or prefer not to) provide the deposit needed to secure a traditional loan, the following alternative options are worth considering:
100% Development Finance – aka Venture Development Finance
This specialist form of development finance provides the borrower with 100% of the funding needed to both purchase the site and complete a project. When the finished property or development is sold, the profits generated are shared between the developer and their lender.
As this is considered a comparatively high-risk form of lending, it is a facility that is usually restricted to experienced developers with an established track record. The planned project will be expected to have an elevated GDV of around £1 million or more and be able to guarantee a solid ROI for the lender.
Interest may be charged at a fixed rate or calculated on the size of the profit the project generates.
If you intend to apply for any form of development finance, it is essential to do so via an independent broker who can compare the market in its entirety on your behalf.
Securing funding from private investors can be difficult as a newcomer to property development – particularly if looking to secure 100% funding.
The viability and strength of your proposal will determine the extent to which private investors may be interested in getting involved.
Private investors will often insist on having a say in the specifics of the project and its management from start to finish. If considering taking on one or more private investors, it is essential that you first consider their track record to ensure their suitability.
Equity Release/Additional Security
If you currently own one or more properties, you may be able to tap into their value by way of equity release or using them as additional security in return for the value of the deposit. This could provide you with the funds you need to finance your project, without having to come up with a physical deposit. It’s a relatively fast and straightforward way of accessing large sums of money for any purpose.
If you intend to complete the project in a relatively short period of time, bridging finance (aka bridging loans) could be ideal. By securing the loan against property you currently own, you will not be expected to produce a deposit.
Remortgage or Secured Loan
There are various other types of secured loans available if you own your own home. A quality remortgage deal could help you secure the funds you need, or you may qualify for a secured loan with a specialist lender. If you have other assets with a high combined value – cars, jewelry, business assets etc. these could also be used.
In all instances, it is important to discuss the available options ahead of time with a reputable independent broker.
For more information or to discuss any aspects of development finance in more detail, contact a member of the team at UK Property Finance anytime.