Development finance is a short-term funding option, usually for between 6-24 months. It is designed specifically to assist with the purchase costs and build costs associated with a residential or commercial development project.
This can be a new build, conversion or refurbishment covering a single unit through to multiple units built across a number of phases.
At MSP we offer several specialist development loans that can all be tailored to your needs.
1. To purchase the site
The first element of the funding will often be used to assist with the purchase of the development site. This could be land where a number of new properties will be built or an existing property that will undergo a refurbishment.
2. To fund the building costs
The second stage of the loan is used to pay for the costs of the build works associated with the project. This is usually drawn in stages, as opposed to being given in one amount at the outset. This often happens once a month as works are completed on the project.
The amount of funding that can be provided will be determined by a professional valuation report that will provide 3 key numbers:
Each lender will have their own lending parameters that determines the maximum that can be lent. At MSP we will lend up to 65% of the current value and 100% of the build costs for all our development loans.
Each deal is assessed individually but the funding must be structured in a way to make sure there is enough funding in place to complete the build in its entirety.
The lender will charge fees and interest for the Loan with the amount of the charges depending on the:
A straight forward refurbishment loan may only be required for 6 months, whereas a multi-unit new build may require 24 months. The term of the loan will allow time for the property to be purchased, developed and then sold or refinanced to repay the debt.
Once a project is up and running, the building costs part of the loan is drawn down in stages (usually monthly). How much is drawn down will depend on the value of work completed on site that month. The benefit of drawing down amounts monthly is that you’ll only pay interest on the total amount drawn at that point in time.
The IMS will act as the ‘eyes and ears’ on the project for the Lender to make sure works are progressing on time and on budget and will flag any potential issues. They will be acting for the Lender, but their costs will be payable by the borrower.
There are several ways that borrowers can repay their Development Finance loans:
40 years’ in property and finance has given us the unique ability to think like you do, understanding your needs along your journey.
We are a Principal Lender with funds available when you require them. We deliver on our Terms without changing the goal posts.
Your dedicated Relationship Manager will get to know your vision and use their expertise to work alongside you to bring it to life.
We approach each project individually, looking at your portfolio as a whole to understand your priorities and meet your needs.
Our streamlined processes and industry knowledge enables us to act decisively to maintain your competitive advantage.
Whilst we’re located on the South-coast, we are proud to be able to provide nationwide lending across England and Wales.
To speak with Lee or another expert about Development Finance simply fill in the form.
