For new builds,conversions and refurbishments of residential houses in areas that have a strong demand.There is a limited number of lenders but they are increasing all the time.
Plans,costings and a schedule of works will be required and we have lenders to fund the purchase of land as well.
Security
All residential development loans are secured by way of a first charge over the subject site/property.
If you are a limited company the lender may require the Directors to guarantee part or all of the facility.
Amount of finance available
We have property finance lenders who will usually lend 100% of the construction costs and the percentage they lend towards a purchase is agreed on each facility. Typically the developer pays for the land and the lender will fund the costs.They usually lend up to 55% of the GDV (gross development value).
Information required
- Location of the site and type of development;
- Purchase price, build costs and expected sales;
- Amount of loan required and how much cash is available as a contribution;
- Experience and background of the developer;
- Experience and background of builder;
- Market evidence on sales price.
As well as a valuation lenders may require the services of an independent quantity surveyor for the duration of the build.
Residential Development Finance was predominantly done by the clearing banks but unfortunately there is very little around. It has been replaced by specialised property finance companies, merchant banks and bridging lenders. Interest rates vary from 7%-24% per annum.
Whilst the finance costs are higher than they used to be if there is sufficient developers profit within the build funding is still available.
If you are using bridging finance we have lenders who will put an exit route in place now via a buy to let mortgage facility in case sales are delayed.
We are constantly reviewing the development finance sector and talk to the banks on a regular basis and we will let you know when their appetite for this sector changes.
