Property Development Finance

Property development finance is a specialist loan product designed to fund the construction of new-build residential and commercial property developments. Unlike a standard mortgage, a development finance loan is assessed primarily on the projected end value of your completed scheme, known as the Gross Development Value (GDV), rather than the current value of the site or your personal income.

The loan is structured as a senior debt facility with staged drawdowns released as your build programme progresses. The initial tranche typically covers land acquisition, with subsequent drawdowns released against completed construction milestones verified by the lender's monitoring surveyor. This staged approach means you only pay interest on funds that have been drawn, keeping your overall finance costs lower.

As specialist development finance brokers, we work with over 100 lenders across the UK, from high-street banks to specialist development finance lenders and challenger banks. Our role is to match your property development project to the most competitive funding options available, negotiating rates, leverage, and loan terms on your behalf.

Development finance works differently from a standard business loan or mortgage. Rather than receiving a lump sum, your facility is drawn down in stages as construction progresses. A typical development loan might have 6 to 10 drawdown stages across a 12 to 24 month build programme, with each release verified by an independent monitoring surveyor instructed by the lender.

The amount you can borrow is determined by two key metrics. Loan to Gross Development Value (LTGDV) measures your total borrowing as a percentage of the projected end value of the completed scheme. Most senior lenders cap this at 60-70% LTGDV. Loan to Cost (LTC) measures borrowing against total project costs, typically capped at 80-90%. The lender will apply whichever metric produces the lower loan amount.

Interest can be serviced monthly or, more commonly, rolled up and added to the loan balance for repayment at the end of the term. The repayment of development finance typically comes from the sale of completed units or refinancing onto long-term mortgages. Your exit strategy is a critical part of any development finance application, and lenders will scrutinise this carefully before approving your loan.

There are several different types of development finance available depending on the nature of your project. Ground-up development finance is the most common, funding new-build residential or commercial property developments from site acquisition through to practical completion. This suits everything from single-plot builds to large housing developments of 100+ units.

Conversion and refurbishment finance covers projects that involve changing the use of an existing building, such as office-to-residential conversions under permitted development rights, or the conversion of barns, churches, and commercial buildings into residential dwellings. For lighter-touch renovation projects, refurbishment finance may be more appropriate and cost-effective.

For larger schemes, the capital stack can be structured with senior debt alongside mezzanine finance to stretch total borrowing to 85-90% LTGDV, reducing the equity contribution required from the developer. Where developers lack the equity for even a mezzanine-supported structure, equity and joint venture partnerships can fill the gap.

Development finance lenders assess applications based on the viability of the project, the experience of the developer, and the strength of the professional team. Most lenders require at least outline planning permission in place before they will consider a development finance application, although some specialist lenders will fund pre-planning acquisitions at lower leverage.

Your track record as a property developer matters significantly. Experienced developers with a proven history of delivering schemes on time and within budget will access better rates and higher leverage. First-time developers can still secure development finance, but may face higher interest rates, lower LTGDV caps, and requirements to appoint an experienced project manager or contractor.

Lenders also look at the professional team behind the project, including your architect, quantity surveyor (QS), main contractor, and solicitor. A RICS-registered valuation of the site and proposed scheme will be required, along with detailed build cost estimates, a realistic sales appraisal, and evidence of comparable property values in the local market.

The costs of a property development loan extend beyond the headline interest rate. Arrangement fees typically range from 1-2% of the gross loan facility, payable on completion of the legal process. Valuation fees cover the RICS valuation of your site and proposed scheme, and typically cost between £2,000 and £10,000 depending on the size of the development.

Monitoring surveyor fees are an ongoing cost throughout the build programme. The lender appoints an independent surveyor to inspect your site before each drawdown, verifying that construction milestones have been met. These inspections typically cost £500 to £1,500 per visit. Legal fees, broker fees, and building control costs should also be factored into your total development finance costs.

You can model these costs using our development finance calculator, which provides an indicative breakdown of total finance costs based on your loan amount, interest rate, and build programme duration. We are transparent about all costs from the outset, ensuring there are no hidden fees in your development finance facility.

To apply for property development finance through Construction Capital, start by submitting your project details in our Deal Room. We typically review new enquiries within 24 hours and come back to you with an initial assessment of the funding options available for your scheme.

We then match your development project to the most suitable lenders from our panel of 100+ development finance lenders across the UK. We present you with indicative terms from multiple sources, explaining the pros and cons of each option so you can make an informed decision. Once you have selected a lender, we manage the full application process including valuation instruction, legal coordination, and credit committee submission.

Typical timescales from application to first drawdown are 4 to 8 weeks, depending on the size and type of property development. This includes the RICS valuation, legal due diligence, and credit committee approval. We can expedite urgent deals where a faster timeline is needed, and we have relationships with lenders whose credit committees meet daily for time-sensitive transactions.