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Develop Your Vision: Unleashing the Power of Property Development Finance

There are many nuances around property development finance. Because of this complexity, to get the ideal funding for their development many developers turn to brokers such as

Your broker will work with you to assess the type of funding you need for your next development case. You’ll get the best funding from our panel of more than 400 lenders.

What types of property development finance are available?

For new property development finance, read on. If you’re converting a property or refurbishing, here’s our guide to refurbishment finance

For ground up development have four main types of development loan, depending on the level of funding you need;

build a home to love with a self build mortgage, property development finance or refurbishment loan to alter what you have.

Traditional debt finance (Senior debt)

Senior debt is the “traditional” form of property development funding. As short term finance it’s a form of bridging finance for property development specifically. That means, that like a bridging loan, the development loan will;

Be short term, generally up to 24 months or 36 months for a larger project.

Allow repayment of the loan and the interest accrued at the end of the loan via property sales or refinance.

Draw down in stages as work on the development project is completed.

The amount of the loan is based both on the cost of the project, that is the cost of the site and the development cost AND the finished value of the development (The GDV or Gross Developed Value).

Because senior debt offers a lower level of finance against these two metrics, it does tend to be the cheaper form of funding.
Additional lending to fund a shortfall in senior debt (Mezzanine Funding)

Plugging the property development finance gap: Mezzanine funding

Because there will sometimes be a shortfall in the senior development finance, mezzanine finance can plug the gap!

Offering a relatively smaller loan, behind the senior debt mezzanine funding will allow a short term fix to a much higher loan to value.

Debt finance with a higher loan to value percentage (Stretched senior debt)

The traditional senior debt lender will not proceed if they do not think their funding will be sufficient to complete the build, so stretched senior debt combines senior debt and mezzanine debt in a single package.

Offering up to 90% of the development cost, stretched senior debt is the most common form of development finance we work with as brokers.

100% project funding through a joint venture with the finance provider (JV funding)

Great sites are like buses, you wait for an age then three come along at once.

Well, that’s no longer a problem, with joint venture finance you can borrow up to 100% of land and development costs.