property development finance North Wales

What is Property Development Finance?

Development Finance is a type of funding that allows you to build a house or houses, commercial units and other structures from the ‘ground up’. It also allows you to convert buildings into something else, like offices into apartments, a church into a house or build a housing estate on land after you have gained planning permission.

Yes it is like a traditional mortgage but the major difference is, it allows toy to buy a property or land without having to worry too much about your credit history. 

You see, like a bridging loan, a development finance loan is based on the asset, in most cases property but also land. The land can be funded even if it has no planning in place (bridging loan) or with full planning which will then allow a development finance loan to used.

There are over 200 different bridging lenders in the UK (yes, 200!) but only about 30 of them offer development finance…And even less offer ground up development finance. Some are major financial institutions like banks and some are specialist lenders you may have heard of like Aldermore or Shawbrook.

However, there are literally hundreds of smaller, alternative finance lenders who generally take more risks than the big banks and this allows them to lend against unusual or unmortgageable assets.

From a bridging loan perspective, it could be buying a house at auction. It may be buying another property before you have sold your existing one or it may even be because you want to buy a piece of land that doesn’t currently have planning permission.

For development, it may be that you have seen a piece of land, designed plans with an architect and submitted a planning application to build 3 or 4 houses. This is the element that is commonly called ground up development finance.

Whatever the reason, development finance can be quick and relatively simple to apply for, if you know what you are doing. Lenders can be great to deal with when the application is packaged and presented to them perfectly but they can also be a nightmare if they feel the loan application looks amateurish.

Unlike a bridging loan or other traditional mortgage or secured loan, a development finance loan is released to the borrower in stages.

The borrower has to complete a certain amount of work and once they have done as much as they can (usually when they have exceeded or are about to exceed their own funds), they arrange for the lender’s Quantity Surveyor (QS) to call out and inspect. Once the QS confirms in writing to the lender that x amount of works have been done satisfactorily, the lender releases some of the money.

Example: Borrower spends £60k ‘getting out of the ground’, footings, etc. The lender QS goes out to confirm that the work has been done and confirms the same to the lender. The lender then releases the £60k directly to the borrower. 

And do on and so on.

Yes it is because this is where the project is being built from scratch, from the ground up, hence the term, ground up development finance.

This presents more risk to a lender due to the fact that the borrower/developer will have to dig below ground to install the footings/drainage,etc and this is where a lot of problems with development finance happen – ‘the parts you can’t see below ground’.

That is why it is essential that the borrower has experience.

You can borrow anything from £100,000 right up to £25m usually. Of course, some brokers will make out that you can borrow more but those lenders that do offer that are very few and far between and the process can take many, many months. 

If only! Everyone asks this question but the simple answer is no, they don’t. The usual excuse is that offering development finance is riskier than offering a residential mortgage for example and we understand that.

However, if you choose the borrower carefully, the quality of the asset or security is good and you do your usual lender due diligence, then there is absolutely no reason at all why banks and other high street lenders shouldn’t offer property development finance.

Yes. Modular construction (also known as a Method of Modern Construction/MMC) is becoming increasingly commons because it is fast and economical. Full details here on our special Modular Construction product.

Compared to a normal mortgage then yes it is.

But you have to remember…These are risky products for lenders. Yes, if it goes well then both the borrower and the lender can earn a LOT OF MONEY. However, if they get the deal wrong then both the lender and borrower could be in a lot of trouble.

Yes you will. There are two distinctions in development finance. One is where you are refurbishing an existing building but the loan will still be drawn in arrears as you continue with the refurb.

The second one, ground up development finance, is much more difficult as there are so many pitfalls and it is a million miles away from just completing a refurb on an existing structure. There can be so many problems below ground, before you even think of the first course of bricks that most lenders will insist on both the borrower and the main contractor they are using, to have suitable experience.

We are an independent specialist mortgage broker based in Conwy that covers the whole of the North Wales region.

This means that we search through our panel of 200+ lenders to find you the right loan at the right interest rate with the lowest possible fees.

The beauty of trying us instead of a lender directly is that we can offer a whole range of products, whereas a lender can only offer their own set of specific products.

Therefore, using a mortgage broker like us gives you way more options.

No we don’t.

We only earn money when we have completed a project and our fee structure is transparent…We get paid 1% of the loan amount BY THE LENDER and this is added on to the loan so you do not have to find this amount on day 1.

We can lend from £100,000 up to £25m and up to 75% LTV.

Any deal above £10m is on a case by case basis and subject to greater scrutiny by our lenders (face to face meetings with the borrower for example) but below that figure, all decisions are made locally.

Bridging loans, commercial mortgages, auction finance and development finance on residential, commercial and industrial properties.

The honest answer is that it depends.

If our lenders feel the asset is good quality and that we are confident we can protect their capital if the deal does subsequently go bad, then we will definitely consider it.

We do lend and have lent to individuals with less than perfect credit and in every case, there is usually a story to tell…One that we are happy to listen to in an attempt to see if we can help.

It’s really simple.

We do not charge broker fees at all.

You will have solicitor fees to pay – the lenders and your own.

You will usually have a valuation fee to pay (unless it’s being re-typed).

In the case of development finance, you will have a Quantity Surveyor (QS) fee to pay. This usually consists of an initial one off fee and a fee every time they visit the property to undertake an inspection.

That’s it.

There NO BROKER FEES (we never charge them), NO UPFRONT FEES, NO OTHER ADMIN FEES, NO OTHER LENDER FEES AND NO OTHER HIDDEN COSTS.

Simple.