Property development loan rates
These rates can vary for a number of reasons, but typically your rate will be based on your LTV, or loan to value, for a bridging loan.
For a 60% LTV you’d expect to pay 0.50% per month, for 65% it would be 0.56% per month, for 70% it would be 0.75% per month and for 75% it would typically be 1.10% per month.
There are other fees to consider too, such as broker fees, exit fees, facility fees, admin fees, solicitor fees and valuation fees. Of course, this is dependent on your circumstances and it’s something a broker will discuss with you in more detail.
Bridging loan examples
As an example, a client may require £150,000 for a piece of land in order to develop it after receiving planning permission, with the total cost of the land being £200,000. The client’s plan may be to use the capital in order to cover the cost of the build and the materials before arranging longer term finance once the development and the project has been completed. In this scenario the LTV of the deal is 75% with an exit plan of re-arranging the finance once completed, with an interest rate of 1.10% per month.
A further example may be a client that wants to acquire a residential property that isn’t suitable for a mortgage and is in a state of disrepair. The property may cost £100,000 and the client may require £60,000, making the LTV 60%. The client has an exit strategy of using the capital to pay for the renovation work on the property before renting it out as a Buy-To-Let, arranging a Buy-To-Let mortgage once the bridging loan has completed. In this example the client would pay roughly 0.50% per month in interest.
What makes property development finance different?
When you apply for this type of finance, you’re expected to understand your industry and the requirements of property development, and in turn you’re in business with a lender who understands what you’ll need.
As opposed to other types of finance the primary focus isn’t on your personal credit rating or circumstances, it’s more on your ability in property development, your track record of success and the type of project you’re looking to fund.
The rates, interest and fees involved are all specifically intended to serve property development clients, and to that end it’s extremely flexible.
When is a bridging loan paid back?
Because a bridging loan is intended to ‘bridge the gap’, the loan is usually repaid at the end of the term once a property has been completed or sold.
Other types of finance
As we’ve mentioned, it may be the case that a bridging loan isn’t the right type of loan or finance for you, and in that case, we’ll encourage you to consider something else. Development finance and property development finance can come in other forms and, again, it’s something we’ll discuss with you in more detail and advise you on.
Here are examples of two other types:
Residential development finance
Designed for developers who are looking to renovate residential properties, this is a specific type of financing that allows you to raise capital against residential developments. If it’s a development that you’re intending to live in, or your immediate family will be living in then this is a property loan that would be regulated by the FCA
New build developer finance
This is, again, specialised finance and is, in some ways, more difficult to be accepted for if you’ve a lack of experience for new build projects as lenders prefer to see at least one successful project before they’ll agree a loan with you.
It should also be said that planning permission having been granted is usually a prerequisite for acceptance for this type of finance.
Learn more about bridging loans
If a bridging loan is something you’ve been considering then we’d encourage you to get in touch with us and speak to one of our brokers who can get more details from you and let you know whether you’re suitable for a bridging loan, or perhaps some other type of finance.
With years of experience in the industry we can shop one of the widest variety of lenders around and offer you exclusive rates with our panel.
Our team of experts are friendly and available to talk you through whatever you might need so why not get in touch with us today?