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Helping You With Property Development Finance
Our expert property development knowledge and experience is what sets us apart from our competitors.
Property development is fast-paced in the UK. No matter if it’s a small-scale project or a large development plan, instant access to funds is essential to get your project moving. Securing property can be time-dependent, and without the appropriate bridging finance available at your fingertips, things can quickly spiral into chaos.
All the planning, regulations and precise preparations count for nothing if you can’t access the much-needed finance in time. At Pinnacle, we can help change that. Bridging finance for a property development project can help turn your situation around quickly. So, whether you are running a “ground up” property development project or focusing on more minor plans, such as an extension, our bridging finance solutions can help you realise the project with that much-needed cash injection.
Most of the time when people hear the term ‘development finance’ they will assume this relates to purchasing a plot of land and building a property from scratch like in ‘Grand Designs’. Whilst this can be the case, development finance can also refer to light or heavy refurbishment of an existing property and are typically for buy to let properties.
Development finance is often a short-term arrangement to facilitate the build or refurbishment of a property, and will need to be repaid once the build is finalised.
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How much can I borrow?
agreed on a pre-existing value, as there will either be no property to base the value on or the property will be in a condition that will not reflect the value upon completion of the refurbishment. Therefore, other factors need to be taken into account such as the current value of the site or property, the build costs and the gross development value (GDV) i.e. the anticipated value of the property once completed. Lenders will generally release a percentage of the land cost, and then a percentage of the build costs, as long as the total loan amount does not exceed the GDV.
Funds are typically released in stages as well, which will allow key stages of the build to be completed such as the groundworks, main build, making the property watertight etc. The lender may arrange for a surveyor to re-inspect the property to ensure progress is being made and the build is at the relevant stage for funds to be released. This is a safer and more cost-efficient way of receiving the funds, to avoid incurring interest on the entire balance of the loan should there be any delays.
How is development finance repaid?
The loan will need to be repaid once the build is completed, often by refinancing to a traditional mortgage arrangement or switching to a development exit such as a bridging loan, whilst waiting for the property to be sold. Alternatively, if the property is able to be sold within the grace period provided by the development finance lender, the proceeds can go straight to paying the loan off without incurring additional interest. Monthly interest charges will often be added to the development loan, which the borrower would then repay once the loan is redeemed to avoid needing to service the interest at the same time as expensive build costs. However, some borrowers may opt to service the interest in order to avoid repaying a lump sum of interest on top of the loan.
Whether you’re looking to venture into your first property development, or an experienced developer looking to begin a new project, get in touch with our specialist lending team today for expert guidance on development finance.