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A Brief Guide to Development Finance in the UK
If you’re a property developer, you’ll know that development finance is essential to your business. Here we’ll give you a comprehensive guide to new build development finance, including what it is, its benefits, how it works, and how to get the best deals. So, if you’re thinking of embarking on a new build development project, make sure you read this first!
The following topics are covered below:
What is Development Finance?
Development finance is a type of loan specifically designed for property developers looking to finance construction on properties or further develop existing properties. Such loans are often used by developers looking to build a portfolio of properties or to maximise their return on investment.
Development loans can be used to fund both residential and commercial developments. The capital from this type of loan can be used to cover the cost of materials, labour and other associated expenses.
One of the key features of build development finance is that it can be used to finance projects at any stage of development. This means that you can apply for funding when you have already secured planning permission or when you are in the process of doing so.
New build development finance can be useful for those looking to embark on a new building project. By carefully considering how best to use the capital from this type of loan, you can ensure that your development project is completed on time and within budget.
Benefits of New Build Development Loans
One of the main benefits of a development loan is that it can be used to finance 100% of the costs associated with your project. This means that you won’t need to put any of your own money into the development, which can free up capital for other purposes. Additionally, new build development loans can be paid back over 30 years, making them very manageable in terms of repayments.
Another benefit of development loans is that they are often interest-only loans. This means that during the construction phase of your project, you will only need to make interest payments on the loan. This can help release cash flow so you can spend more money building the property. Once construction is complete, and the property is rented or sold, you will begin making capital repayments on the loan until it is paid off in full.
How Does Development Finance Work?
New build development finance typically works in one of two ways; either as a lump sum payment which is paid up-front or as a ‘draw-down’ facility whereby funds are released in stages as the project progresses.
As with any other type of finance, new build development finance will need to be repaid over a settled period, plus interest. The repayment terms will be agreed upon at the outset and will depend on several factors, such as the time period of the loan, the amount being borrowed, and the perceived risk of the project.
Lenders will take into account a few factors when approving financing for new construction projects. One of the most important factors is the experience of the developer. Lenders will want to verify that the developer has a good track record of completing successful projects. They will also want to see a detailed development plan, including timelines and budgets. The developers’ personal financial situation will also be considered, as well as the overall financial stability of the project. To secure funding, developers must demonstrate that they have a sound plan for successfully completing their project.
Getting the Best Deals on New Build Development Finance
If you’re looking for competitive deals on new build development loans, then you can do a few things to boost your chances of getting approved for finance at favourable rates.
First and foremost, it’s important to remember that lenders will look at your track record when considering your application for new build development finance. When applying for such a loan, it is important to provide accurate information about your project to secure the best possible deal.
Plus, it’s essential that you have a strong track record in both developing properties and repaying loans. If you have experience with short-term and long-term loans, this will also stand you in good stead when applying for new build development finance.
Another thing you can do to increase your chances of getting approved for favourable rates on new build development finance is to shop around and compare different lenders. This way, you can make sure that you’re getting the best deal possible on your loan.
But it is not always unchallenging to navigate different lenders to find the best deals. The complex nature of these loans is also responsible for making it hard to get the best rates. In such cases, a mortgage broker can help you find the best deal.
So there you have it; our comprehensive guide to new build development finance. Remember, if you’re thinking of embarking on a new build development project, make sure you do your research first and compare different lenders to ensure that you’re getting the best deal possible on your loan. Good luck!