Whether you wish to kick start your next property development project or are looking forward to starting a career in the commercial property industry, there is not a lot you can do without proper funding. 

Thankfully, there are a plethora of property development funding in UK solutions available for investors, landlords and even property developers. But, we know that lending marketing can get overwhelming, even for most seasoned players in the industry.

So, to help you grasp the concept, we will take an in-depth look into the different aspects of property development finance in the UK. But first, let us understand –

What is development finance?

As the name suggests, a property development loan is a type of secured, short-term finance that assists the borrower in developing, converting or refurbishing property/properties.

Even though property development finance can be taken for various development projects, most businessmen use it for “heavier” projects instead.

How does property development finance work?

Compared to residential mortgages, development finance can be quite complex. Some funds are advanced upfront, and then the remaining ones are provided throughout the build.

Most lenders offer around 60% to 65% of funds against the site’s value at the beginning of the project. The remaining funds are then released at agreed intervals.

How to pay the interest?

Instead of making monthly payments, the borrower is required to pay the interest as every stage draws down. And once the development is complete, the loan is required to be paid along with the accrued interest.

This process helps the borrower immensely because it can be hard to gather and pay off the interest during the build. With the removal of monthly payments, it becomes easy to manage the loan for all the parties involved.

What is the maximum loan available?

The availability of maximum loan is calculated based on certain metrics, such as:

LTV or loan to value ratio is employed to determine the maximum available advance. The site is revaluated throughout the build by the monitoring surveyor to prevent the lender from being overexposed.
With LTC or loan to cost is used to determine that you are putting up a specific amount of the money by yourself. For instance, with a maximum LTC of 90%, the lender would not put anything more than 90% of the total cost. This means you will have to take care of the remaining 10%.
Loan to GDV or gross development value is the maximum per cent of loan the lender is ready to offer you. For instance, with a £1,000,000 scheme that has 70% GDV, the lender will only provide £700,000

These three metrics would be used to calculate the maximum loan availability. If there is a conflict between the three figures, the lender will directly opt for the lower of the three to cap the loan.

Over To You

Now that you know a lot more about property development funding in UK than you did before you started reading this article, it is time to connect with Hunter Finance to get started with the application process for a property development loan in uk.

Their experts will guide you to kickstart your new property development project just the way you want to.

Robert Boren is the author of this article. For further detail about Property Development Loan in UK. Please visit the website: hunterfinance.co.uk