We have a wide range of competitive and flexible development finance products that are perfect for property development.
Friends Capital have existing relationships with specialist Development Finance lenders and are experts in advising on development finance. We can help you find the best possible mortgage deal. We will review your personal circumstances and then search the entire market to ensure you get the best mortgage rates possible. We will then deal with all the paperwork, submit your mortgage application, liaise with your mortgage lender and solicitor, and ensure that your mortgage application is completed as quickly as possible. We can:
Save you money on your mortgage deal
Offer a free consultation
Offer unbiased financial advice
Save you time in your mortgage application
Give you a dedicated account manager who is available to you through the process
Property development finance is a short-term loan for residential property developments, such as refurbishment projects or construction. The finance is paid back over stages – referred to as a term.
Different lenders will have their own definition of light and heavy refurbishment, but generally:
Light refurbishment – mainly aesthetic rather than structural changes to the property. For example: new kitchen, bathroom, windows and central heating.
Heavy refurbishment or renovation – involving things like new plumbing, electrics, moving internal walls, partial demolition and rebuild, extensions, attic conversions and converting a property into apartments/flats.
Development finance can be used to finance both the land purchase, and also the build costs.
Why Use Development Finance?
Development finance enables you to take on larger projects than you would otherwise be in a financial position to consider, increasing your potential profits
Avoids tying up a substantial proportion of your cash until the project is sold.
You can undertake multiple projects simultaneously, or avoid having to wait until an existing project is sold, or is fully sold, before commencing your next development. Using finance can help avoid missing out on your next project or other potentially great opportunities.
Your actual return on investment rate (ROI) will be greater if you are putting in less capital. Although you will have the cost of the financing to pay from your profits, the actual rate of return on the amount that you have personally invested will be higher.
How Much Can I Borrow?
When looking at how much you can borrow you will need to factor in:
Land costs
Development costs
Lender fees – set up fees, exit fees
Professional costs – solicitors, surveyors, etc
Contingency costs
You can normally borrow 70% of the land/site cost and 100% of the build cost.
How Do I Repay My Development Finance?
All lenders will want to see a clear exit plan before they will agree your loan. The most common exit routes are:
Sale of the finished property / site
Refinancing using a developer exit product – this will usually be at a lower rate, enabling you to clear the original development loan and providing you with finance until the site is sold.
Long term refinancing – if this is your planed exit route it can be advantageous to have this lined up when you apply for your development finance as lenders will then have the certainty of a clear exit route. Long term refinancing would be used when the developer plan to keep the finished development for themselves to use or rent out.
You may decide to buy a new home, and rent out your current home. This is a process called ‘Let to Buy’. If you move out of the property you’re currently living in and intend to rent it out, you’ll need a Buy to Let mortgage. You could ask your current lender for their consent to let the property out. However, this may involve a fee or switching your mortgage to a higher rate. Not all lenders will allow this.
Alternatively, you can remortgage to a new lender on a buy to let deal. If you plan to stick with your current lender, you must inform them that you intend to let your home – failure to do so could be classed as a breach of contract. You should seek professional advice from a mortgage broker regarding your situation, so you can choose the best financially viable option for your circumstances.
How Can Friends Capital Help with Development Finance?
Friends Capital have pre-existing relationships with development finance lenders. We can search the entire market and get access to the best and most exclusive deals available. Then we will choose the deal that are most appropriate to your personal circumstance. We can:
Find you a lender that specialises in development finance
Find you a deal appropriate to your personal circumstance
Offer unbiased financial advice
Give advice on what mortgage lenders will require, including giving you advice on an exit strategy for the mortgage end
Give you a no obligation mortgage quote
Deal with all the paper work, liaise with the lenders and solicitors. We will also make sure the application goes through as quickly as possible
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We aim to get the lowest mortgage rates on the market
