Development finance is a form of short-term lending that is used to fund the construction or renovation or real estate projects. This type of finance is designed to help developers, builders and investors bring new properties to market or renovate existing properties. Development finance is available for 6-24 months and is designed to assist with the land purchase costs and build costs associated with a residential or commercial development project. We specialise in ground up developments, conversions, and renovations for projects of all sizes, from single units to multi-phase developments.
How does development finance work?
A development loan, like a bridging loan, is a short-term financing option where the lender expects repayment once the project is completed and sold or refinanced. Lenders typically provide funding for both the purchase of the land (up to 70% of the land value) and provide funding for the build costs, often up to 100% of the build cost. They evaluate the value of the land prior to construction, the total cost of the building project, and any additional associated costs. The lenders main focus is on the projected value of the completed property development, known as the ‘Gross Development Value’ or ‘GDV’.
The GDV is a projection of the total value of the development project upon completion. Subtracting the total cost of both the land purchase and build cost (including Solicitors, Architects, Structural engineers, insurances, warranties etc) from the GDV shows the potential profit for the project. Lenders often require a high profit margin for funding. Development finance institutions typically provide funding for the project for the initial land purchase and subsequent stages of construction. This method of finance can provide the most funding, and as the project progresses, additional funds can be released based on the increasing value of the property.
Why use a development finance broker?
The process of obtaining development finance can be complex and time-consuming, which is where a development finance broker comes in. One of our expert development finance brokers will act as a middleman between the borrower (the developer) and the lender (the bank or financial institution providing the loan). The broker will work with the developer to understand their specific needs and requirements and will then use their knowledge and expertise to match the developer with the best lender for the project. One of the key benefits of using a development finance broker is that we have access to a wide range of lenders and can therefore offer choice of different loan options. This means that you as a developer will be more likely to find a loan that meets your needs. It is important to note that development finance can be more expensive than traditional mortgages, as the lender is taking on a greater level of risk. The interest rate and fees on a development loan may be higher, and the loan may also be secured against the developers’ personal assets. If you are considering a property development project and would like to explore your financing options, its worth consulting one of our development finance brokers. They can help you to understand the process and find the best loan for your project, so you can move forward with confidence.
Robi Finance Ltd
4 Pelham Court, Cambridge CB4 3TD, Tel no: 01223 560 472 – 07956827018, Email: [email protected]
The company is registered under Reg No:14639627 in England and Wales.
Robi Finance Ltd is registered with the Information Commissioner’s Office under registration reference: ZB477056 Copyright © 2021. All Rights Reserved.
Robi Finance Ltd is an Appointed Representative of Connect IFA Limited 441505 which is Authorised and Regulated by the Financial Conduct Authority and is entered on the financial services register (https://register.fca.org.uk/s/) under reference 995310.
The FCA does not regulate some forms of Business Buy to Let Mortgages and Commercial Mortgages to Limited Companies.
Not all services we offer are covered by the Financial Conduct Authority.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
The information, advice and/or guidance contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
A fee will be payable for arranging your mortgage with Robi Finance Ltd. The amount of the fee will depend upon your circumstances. Your consultant will confirm the amount before you choose to proceed but we estimate it to be around 0.65% (min £499). The initial consultation is free.
Commission Disclosure: We are a credit broker and not a lender. We have access to an extensive range of lenders. Once we have assessed your needs, we will recommend a lender(s) that provides suitable products to meet your personal circumstances and requirements, though you are not obliged to take our advice or recommendation. Whichever lender we introduce you to, we will typically receive a commission from them after the completion of the transaction. The amount of commission we receive will normally be a fixed percentage of the amount you borrow from the lender. Commission paid to us may vary in amount depending on the lender and product. The lenders we work with pay commissions at different rates. However, the amount of commission that we receive from a lender does not have an effect on the amount that you pay to that lender under your credit agreement.
How To Make a Complaint: It is our intention to provide you with a high level of customer service at all times. If there is an occasion when we do not meet these standards and you wish to register a complaint, please write to; Compliance Department; Connect IFA Ltd, 39 Station Lane, Hornchurch, RM12 6JL or call: 01708 676110. If you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service www.financial-ombudsman.org.uk.
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