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]
- 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: