Mezzanine Loans
Mezzanine Loans act as ‘top-up’ funding for developments which require additional borrowing. A Mezzanine Loan provider will take a second legal charge on the site, enabling the borrower to stretch their borrowing to up to 75% of the GDV when the senior loan is capped lower.
Interest rates for Mezzanine Loans are higher due to their security being ranked behind that of the senior loan, they tend to be between 15-25% p.a. but this is charged on a small percentage of the overall debt.
Development Finance
Developments Finance is a lending instrument designed to enable borrowers to fund the construction of residential or commercial property. It typically assists borrowers with the purchase of land and cover 100% of development costs in staged drawdowns. Development Finance can be utilised for both new-build and conversion projects.
Loan terms tend to range between 12 – 36 months, and finance costs including interest and fees are rolled up and paid upon sale or refinance of the completed properties.
- Loan size
- Leverage [Loan to Value, Loan to Cost & Loan to GDV]
- Location
- Borrower Experience
- Type of Property
- Construction Method
- Wider economic factors
Most lenders will limit their maximum lending to 60-65% of the Gross Development Value [GDV] which is the value of the completed properties or 80-85% of the Total Project Cost. However, we work with several specialist lenders who can fund up to 70-75% of the GDV or up to 100% of Costs.
We also work with lenders that are comfortable lending to first-time developers, provided they are using an experienced contractor.
Interest rates for Development Finance range from 6% p.a. to 14% p.a. on drawn funds depending on the factors listed above.
There are a broad range of lenders that operate in the market, each with varying credit criteria and pricing structures. The factors which lenders base decisions on include but are not limited to: