Development Finance

Development finance is specialist lending for property development projects — new builds, conversions, refurbishments, and renovations. It's structured differently to standard mortgages, with funds released in stages as the build progresses.

Most development finance uses a staged drawdown model. You receive an initial tranche to purchase land or start works, then further tranches are released at agreed milestones (e.g. foundations, first fix, completion). This reduces the lender's risk and your interest costs.

Loan to Gross Development Value — the loan amount as a percentage of what the completed development will be worth. Most lenders offer up to 60-70% LTGDV, meaning your completed project must be worth significantly more than the loan.

Loan to Cost — the loan amount as a percentage of total project costs (land + build costs). Most senior lenders offer up to 70-85% LTC, with mezzanine finance available to bridge the remaining gap.

Most lenders prefer developers with a track record, but some will consider first-time developers for smaller projects (under £500k) if the project is straightforward and you have relevant professional experience.

The two most common exit strategies are selling the completed units or refinancing to a standard commercial mortgage or buy-to-let portfolio. Your exit strategy needs to be realistic and supported by comparable evidence.