These will depend according to the development finance loan in question. However, features to expect include:
- A LTGDV (Loan to Ground Development Value) of up to 75% for residential projects
- LTGDV of up to 55% for commercial projects
Interest rates and fees
- Interest rates that may be expressed annually, but which are repaid monthly.
- Possible exit fees (but not in all cases, as some lenders allow you to repay early without fees)
- Options to pay interest fully rolled up, part-rolled up or serviced, according to affordability. (Typically, a loan advance is paid net of the total interest fee over the term of the loan, plus the arrangement fee.)
- On some loans, the ability to repay the loan early, if wished, without early repayment charges.
- Valuations on this type of loan can be more expensive than with other loans, because of the complexity of the product.
- A maximum loan term of around 36 months
- Funding released in stages, upon a series of checks
- Security for the loan can be provided via other owned properties
- Interest is only paid on the money borrowed - if the project stays under budget, applicants are not usually obliged to borrow the entire original loan value.
- Usually, to secure the loan, the lender will require a building contractor’s contract, JCT. Every lender will have their own set of criteria, which a development loan broker will be able to advise upon.