Phone link
Phone link

Live chat
CorecoOverview

What is Property Development Finance?


As the name suggests, property development finance is a financial loan provided to an individual or business to develop or redevelop property. For example, building an extension on a residential property or creating new office space within a commercial property. It can help you turn a development project into a dream home or profitable investment.

Although large loans are available, some up to £100 million, property development loans are segmented into phases and drawn down as the project progresses.

Lenders offering property development finance want to ensure that the money will be paid back in full and on time, therefore it’s important that an exit strategy is in place. For example, this may be the sale of the property which is a common solution we see from our clients. Make sure you have thought about this in advance – lenders will always ask!

Curious to see property development finance in action? Take a look at how we helped a first time landlord broaden his portfolio.

If you’re looking for property development finance, or have a project you want to discuss with our qualified brokers call us on 020 7220 5100 or contact us via our online form

CorecoFaqs

FAQs

  • What types of property development finance are available?

    Depending on the project, there are many types of development finance available. They’re suitable for:

    • Commercial or Semi Commercial property development
    • Residential property development
    • New build developments
    • Single unit to large multi-unit schemes
    • Sales Period Funding
    • Renovations and conversions
    • Light or heavy refurbishment
    • Development exit funding

    In some instances, development finance can also be used in the early stages of the project. For example, to finance the land/site purchase and also the build costs.

  • Who can get property development finance?

    While it’s no surprise lenders may be more inclined to provide competitive loans to experienced property developers, it’s not always the case. There are a number of alternative lenders in the market who will consider first time developers. However, regardless of your experience, here are two top tips that we think are well received by lenders:

    • Ensure you have done the maths correctly and the project is viable with evidence to justify.
    • If possible, instruct a project monitor or professional team to oversee the development project to make certain works run smoothly.

    Contact our team of property development brokers if you’re unsure about whether you would qualify for development finance. Our specialist team are on hand to talk through your project and may be able to suggest alternative finance if required.

  • What are property development finance terms?

    Property development finance terms are the pre-agreed length of time the loan is secured for. The term of the loan is determined by the time to build and exit the finance. Typically, the term is up to 24 months but for larger, more complex projects, 36 months may be appropriate.

    For the loans themselves, they are often arranged on a monthly interest only basis which is paid in full at the end of the term. Sometimes the lender will require the loan to be serviced upon execution of the exit strategy, however this is less common.

  • What interest rates are available for development finance?

    Typical interest rates for property development finance are very broad. The overall stack of finance can vary significantly and is determined by the project itself, namely the size and type.

    However, in order to achieve the most suitable rate for your project it’s important to discuss your options with a member of our specialist development team. As experienced advisers in property development finance, our team are on hand to suggest which lenders may present you with the most relevant terms.

  • How do I stack the levels of property development finance?

    Senior finance

    • 1st charge security
    • Interest rates are dependent upon several factors, but typically range from 3-7% per annum
    • Arrangement fees and exit fees are between 1-3% in total.

    Junior (or mezzanine) finance

    • 2nd charge security
    • Interest rates are dependent upon a number of different factors, though typical rates vary between 7-20% per annum.
    • Similar to senior finance, arrangement exit fees are between 1-3% in total

    Equity finance

    • The security varies on the structure, but normally equity finance sits behind all other lenders
    • Typically, the finance available ranges between 30-50% of the profit of the structure
    • The returns offered vary
CorecoImportant Information

The important bit


Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.

A percentage of the mortgage amount may be charged depending on individual circumstances. A typical fee is 1%.

Coreco Commercial is a trading style of Coreco Specialist Finance. Coreco Specialist Finance. Registered Office: 117-119 Houndsditch, London EC3A 7BT. Registered in England Number: 06851546

Coreco Specialist Finance Limited is authorised and regulated by the Financial Conduct Authority.

Some types of finance offered by Coreco Commercial are not regulated. Please contact us for more details.

Coreco Commercial advisers are experienced mortgage advisers but we are not tax advisers. Please seek independent tax advice if required before you decide to proceed.

CorecoDNA
Overlay image

Personal

We know that all our clients are unique, and therefore the finance you require needs a different approach. We pride ourselves on providing a client focussed journey built around your needs and goals.

Overlay image
Overlay image

Professional

Our team always expresses their professionalism through their authenticity, high level of work ethic, and can-do attitude. We always find the best way for our clients to succeed.

Overlay image
Overlay image

Progressive

Our progressive and forward-thinking outlook allows us to guarantee an exceptional level of innovative advice and service, ensuring an effortless, client-centric journey in the ever-changing financial world.

Overlay image
CorecoContact

Want to talk to us?

Fill out the details below to start a conversation with one of the team.

Thank you for your submission

    CorecoReviews

    Advice you can trust