How development finance works
Development finance pays for part of the site purchase on day one, then for the build costs in stages (drawdowns) as a monitoring surveyor confirms the work is done. Interest is charged only on the money drawn so far and is usually rolled up until the end. You repay from the sale of the finished units or by refinancing onto a longer-term mortgage.
What it’s used for
- Ground-up schemes, from a single house to blocks of flats.
- Conversions, such as offices to flats, or a house into an HMO.
- Heavy refurbishment where the works need planning or building regulations sign-off.
- Mixed-use schemes with shops or offices below and flats above.
The numbers lenders look at
Lenders work from the gross development value (GDV), which is what the scheme will be worth when finished. They typically lend up to 60–70% of GDV in total, and usually want to see a profit of around 20% of GDV for you as developer. They also look at how much of the total cost they fund (loan to cost) and how much cash you put in.
| Up to 60% of GDV | 0.70% to 0.90% a month |
|---|---|
| 60% to 70% of GDV | 0.85% to 1.05% a month |
| Above 70% of GDV | 1.00% to 1.30% a month |
Our redevelopment calculator works through all of this: land and build drawdowns, rolled-up interest month by month, fees, your profit on cost and on GDV, and the cash you need.
What helps an application
Planning permission in place, a realistic build cost from a builder or quantity surveyor, a contingency (often 5–10%), evidence of sale values for similar finished units, and a track record. First-time developers can still get finance, usually at a lower loan to cost and with an experienced contractor.
How we help
- Test the scheme in the free calculator. No credit check and no obligation.
- Send us the scheme in a two-minute form. Your figures come with it.
- We pick the broker or lender best suited to the scheme, its size and your experience.
- We introduce you, with the details explained, and stay on hand if you need us.
Your property may be repossessed if you do not keep up repayments on a loan secured on it. Build costs and timescales can overrun, so lenders expect a contingency and a realistic programme.