DEVELOPMENT FINANCE

Available up to 75% of the Gross Development Value (GDV)
The maximum loan amount is calculated as a percentage of GDV and is subject to the loan not exceeding 90% of the total development cost.

The loan covers 100% of the build cost and up to 70% of the purchase price or land value
The developer must provide the deposit for the purchase of the site. The lender funds the balance of the purchase price, the professional fees and the build costs.

Terms of up to 36 months
Most lenders have a minimum term of 12 months and most loans are usually repaid within 18 months, but on larger more complex sites the loan may be for 24 months or even longer.

Residential and Commercial developments
Not all lenders offer loans for commercial development. Commercial development loans may also be subject to higher interest rates and lower percentages against GDV and costs.

Projects are assessed on their individual merits based on location, type, profit margin and developer’s experience
It is important to present each development proposal as favourably as possible and to include exactly what information each lender wants to see and in their preferred formats. This makes it more    likely that you will be offered the required loan amount and at the lowest possible interest rate and fees.

The loan is released in stage payments subject to inspections by the lender’s Monitoring Surveyor
Following the initial advance towards the purchase of the site, the lender will release the balance of the loan in stage payments. These stage payments are made once the Monitoring Surveyor has confirmed progress on site and the costs incurred to that point.

A provision for interest is deducted from the gross loan so no monthly repayments are required
The lender calculates the likely interest over the term of the loan (allowing for the scheduled stage releases) and deducts it from the gross loan amount. This provision for interest means the borrower is not required to make monthly payments and the lender then calculates the actual amount of interest due when the loan is repaid.

Fees and Charges are more expensive than longer term loans
Most lenders charge an Arrangement Fee of up to 2% of the gross loan amount and many also charge an “Exit Fee” of usually 1% of the loan. Some lenders calculate this Exit Fee on the GDV amount. The valuation and legal fees are generally higher than on longer term loans and the borrower is also responsible for covering the cost of the Monitoring Surveyor’s inspections.