Property Development Loans

What are property development loans?

Property development finance is a type of loan that provides new or experienced property developers with a financial solution to be able to renovate existing properties or to build on land from scratch.

There are various types of property loans available, so you need to make sure that you are applying for the most suitable type of finance to meet your requirements. An expert adviser in property development finance options is recommended to make sure the loan is suitable.

Types of property to be financed

In general, property development finance is available on any type of property, whether it is residential or commercial. As long as you are renting the residential property out, then it is deemed commercial as you will be expecting to make a profit from the investment.

Commercial property development finance will cover the build or redevelopment of commercial properties such as shops, offices, warehouses etc.

Property development loans explained

Property development finance is designed to be a short-term financial solution as it is designed to cover the purchase and the cost of developing or refurbishing the property.  The loan can be used to pay for any contractors or marketing required to make the property fit for purpose and attractive to potential tenants or buyers.

Property development finance is not normally given in a lump sum, rather it is given in instalments as the project continues. The amount you receive will depend on the Gross Development Value of the project (the added value to the property after the development) as well as other variables.

The amount of finance that is available will depend on your property development plans but most lenders will look to have a loan-to-cost ratio of about 60-70%. If you are applying for a property development loan, you need to have as much detail of the plan as possible, with evidence of contractor costs, financial predictions, and expected value upon completion. Income stability will also be assessed to ensure that the repayments will be affordable for the applicant as well.

The amount of finance available for property development loans will depend on the variables above but as a general rule, most lenders will offer £100,000 to £2 million. You have to consider the cost of the development and the associated costs, including interest, surveyors’, and solicitors’ fees.

Expert property development finance advisers

There are lots of property development financial options available and choosing the right one can be difficult to select. Speaking to a property development expert is advisable to save you time and energy finding a suitable finance package.

The experts at FT Rich Mummy work daily with clients that are looking to source finance to cover their property development projects so you can rest assured that the financial advice you are getting is coming from experienced and dedicated professionals.

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