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What is Development Finance?

Why Use Development Finance?

How Much Can I Borrow?

How Do I Repay My Development Finance?

How Can Friends Capital Help with Development Finance?

Development Finance

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 

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What is Development Finance?

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

Two Steps to Contacting Friends Capital 

Step 1 

Either call us, email us or request a call back using our call back submission form. 

Step 2 

One of our friendly advisors will either call you back within 24 hours (usually the same working day), or will take details from you in order to best deal with your situation. 

When you speak with us, we will take a ‘fact find’. At this stage we take basic details about your situation. We will then search the whole of the market and find you the best deal available. 

If you are happy with the deal that we offer, we will then contact the lender for you and get you what is called a ‘decision in principal’. 

If you’re happy with the decision in principal then we will secure this deal for you and deal with the application for you on your behalf. 

We aim to get the lowest mortgage rates on the market

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