Understanding Development Finance: A Guide to Funding Property Development Projects
Maximizing Funding for Your Property Development Project: Tips and Strategies
What is Development Finance?
Development finance is a type of loan that is specifically designed to fund the purchase, refurbishment, or construction of properties for development purposes. This type of financing is typically used by property developers and builders to fund the development of new properties or the renovation of existing ones.
The amount of development finance that can be provided will depend on several factors, including the value of the property, the cost of the build, and the expected gross development value (GDV) of the completed project. The GDV is the expected value of the property once all works have been completed, and it is a crucial factor in determining the amount of financing that can be provided.
How is Development Finance Calculated?
To determine the amount of development finance that can be borrowed, it is essential to conduct a professional valuation of the property. This process involves evaluating the current value of the property, the build costs, and the expected GDV of the completed project.
The current value of the property is the value of the site with planning permission or the value of the property before refurbishment. This number is crucial because it gives an indication of the potential value of the completed project.
The build costs are the expenses associated with the construction or refurbishment of the property. This includes materials, labor, and other expenses related to the project.
The GDV of the completed project is the expected value of the property once all works have been completed. This number is vital because it gives an indication of the potential profit from the project.
Once these numbers have been determined, each lender will have their own lending parameters that determine the maximum amount that can be lent. For example, some lenders will lend up to 65% of the current value and 100% of the build costs for all development loans.
Tips for Obtaining Development Finance
- Do thorough research and compare offers from different lenders to find the best deal for your project.
- Consider seeking the help of a financial advisor or broker to navigate the development finance process and find the right lender for your needs
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- Don't forget to factor in additional costs, such as stamp duty, legal fees, and insurance, into your budget.
- Keep in mind that development finance is a high-risk investment, and it is essential to have a clear plan in place to mitigate potential risks and ensure the project's success. This may include obtaining professional advice, securing a reliable team of contractors, and having contingency plans in place.
- Be prepared to provide detailed financial projections and a comprehensive business plan to potential lenders to demonstrate the viability of your project.
In conclusion, development finance is a specialized type of loan that is used to fund the purchase, refurbishment, or construction of properties for development purposes. The amount of financing that can be provided will depend on the current value of the property, the build costs, and the expected GDV of the completed project. It is essential to carefully consider all factors and options when seeking development finance to ensure the success of your project.
Who Are Willow Private Finance?
Willow Private Finance is a specialist mortgage brokerage that offers professional financial advice and assistance to clients seeking to secure a mortgage or refinance their existing mortgage. The company is dedicated to providing its clients with personalized and tailor-made solutions to meet their specific financial needs and goals.
With a team of highly qualified and experienced mortgage advisors, Willow Private Finance is able to offer expert advice and guidance on a wide range of mortgage products and options, including first-time buyer mortgages, buy-to-let mortgages, Commercial mortgages, Bridging finance, Lombard lending, and Development finance. The company also offers a range of services to help clients navigate the complex and often confusing process of securing a mortgage, including assistance with mortgage application and documentation, as well as ongoing support throughout the mortgage process.
In addition to its mortgage brokerage services, Willow Private Finance also offers a range of other financial services, including protection insurance and equity release.. The company's goal is to provide its clients with a comprehensive and holistic approach to finance and management, helping them to achieve their financial goals and secure their financial future.
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Understanding Development Finance: A Guide to Funding Property Development Projects- Click Here
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