Property development is never straightforward, so start with defining your long and short term goals for your investment property. Whether you are looking at short term or long term. Short term buy it do it up and sell id on or keep for a few years and rent it. It may be possible to do both with the right development.
Let’s start with short term property development finance this needs short-term funding option. Development finance is usually taken over a period of between 6-24 months. This really depends on the type of property development; with a light refurbishment it would be as low as 6 months or less, and with a larger scheme up to 24 months.
How to get the money firstly can you remortgage your exiting property? If the answer is yes this may be the best way to raise all or part of the money.
If you can’t then you may need to look at bridging finance which can be a fast, flexible, short-term, secured finance for any purpose. Bridging finance are designed to provide short-term access to money at a high-rate of interest. If you take out bridging finance, you could face costs of up to 1.5% a month, meaning the interest rate is 18% a year.
There are two main types of bridging finance, 'closed' bridge and the 'open' bridge. A closed bridge is only available to homebuyers who have already exchanged on the sale of their existing property. Very few sales fall through after exchange, so lenders are happy to offer closed-bridge financing.
An 'open' bridge is taken out by buyers who have found their ideal property, but may not have put their existing home on the market. A bank will ask lots of questions and want supporting information. It will also insist on you having lots of equity in your existing property.
Most lenders put a 12-month limit on an open bridge. After that, they will probably renegotiate as long as you have paid the interest during the period and the property market hasn't collapsed.
The thing to remember with any property development funding is that you will need to allow for a re-sales period to be factored in to the loan period. If you do not take this into account and your properties have not sold within the agreed loan facility, you could end up paying another arrangement fee to extend your finance agreement, so plan all your costs early.
long term property development finance. There are no set rates for property development finance, lenders assess each application individually and price according to the strength of the development proposition and the borrower. A good benchmark starts from around Bank Rate (currently 0.5%, variable) plus 4.5%. Usually the interest can be rolled up into the loan, so there are no monthly payments.
The loan amount is based on a percentage of the gross development value (GDV) at the end of the work, currently up to a maximum of 60% loan to GDV, with a maximum of 75% of the total costs.
Long term property development loans are normally structured to ensure that the developer’s own money is used first with the lender providing funds to be drawn down in stages against architect’s or quantity surveyor’s certificates.
A property development loan is usually arranged on an interest only basis and the term of the loan would depend on the size and nature of the underlying project.
We can source competitive interest rates, and flexible deals with the expertise to know exactly how to present your proposition to lenders in order to maximise the likelihood of a positive response. Following an initial discussion, we will agree the way forward, hold detailed discussions with you, normally face to face, to gain all the necessary information to allow the lender to provide a positive decision If you are looking to raise commercial finance or know someone that needs to we are here to help.