Bridging Loan for Property Development

Development finance is a short-term loan option for property developers that is used to assist in the purchase of land and build costs that come with property development.

Signature Property Finance are able to obtain development funding for clients looking to build 1-15 properties, with loan values starting from £250,000 to £3 million over a 24-month term. We offer loan developers 100% of their building costs as well providing a contingency if costs exceed estimations.

No one can control market conditions, so it’s vital to control costs by drawing up detailed plans before you start, ideally even before buying the land or start building. As a guide, your budget should include at least a 10% contingency for things not going to plan because they rarely do in property developing.

There are some exceptions to these criteria so please get in touch for more information about your property development plans to see if we can help.

To obtain funding for your property development project you’ll need to get in touch with your Signature Property Finance Relationship Manager or contact us directly using the form at the bottom of the page.

Once you’ve discussed everything with our team, we will be able to assess the situation and give you a decision in principle – this will contain information that is needed to underwrite the loan. You will agree on the amount of finance required for the project and how long the loan will be taken out for.

After all the information is submitted along with your application forms, we can provide a formal offer and begin to process the loan and all the paperwork required. This is where any credit and background checks are completed to ensure developers will deliver on promises as well as follow the proposed exit route.

The next step is to complete the process, sign all paperwork and the monies are handed over to complete the project. This could mean you receive your development finance within 48 hours of completion, and you can begin work right away.

At Signature Property Finance we allow our property development clients to borrow from £250,000 up to £3,000,000 over a 24-month period depending on the requirements of the project.

We understand that sometimes the unexpected happens and we work with you to ensure that doesn’t disrupt your plans. We build in potential cost contingencies and always offer a facility that allows you time to sell or re-finance your completed scheme. This approach ensures you avoid lending penalties (often associated with some lenders) or having to sell assets quickly below market value to repay funds in a hurry.

To obtain property development funding from Signature Property Finance we require a 35% deposit of the GDV (Gross Development Value) or 20% of the associated costs, whichever equates to a lower loan amount.

As an example, a development with a GDV of £1 million would require a deposit of 35% (£350,000) or 20% of the costs associated with the development. If the costs only equal £250,000, you will be required to provide £350,000 as a deposit for your development finance.

GDV or Gross Development Value is the expected value of a development upon completion. This could be the value on the open market or rental potential, this is determined on the basis of current and recent transactions of a similar value.

Signature Property Finance are happy to work with first-time developers on a case-by-case basis. If you’re looking to get involved in property development or want to find out more information, please get in touch with one of the team.

At Signature Property Finance, we strive to bring you the most competitive rates available, and therefore choose not to advertise our rates as they regularly fluctuate according to the property market and the type of project we are funding.

By doing this we can be more flexible in our approach to lending, and we can adapt everything to an individual project or client. When you speak to us about obtaining development finance and we provide you with a quote, we won’t change our rates or add any hidden costs – we will remain transparent about our prices from the very beginning.

No hidden fees or nasty surprises – that is our guarantee to you.

Bridging finance is different to a mortgage as bridging finance is provided based on a business plan and plans provided for a property or development. These are usually short-term loans of around 24 months provided to bridge a financial gap for development and property refurbishment professionals who may be between selling and buying new assets for their portfolio.

Mortgages are based on the finances of a person or persons applying for money to obtain a property, with loan terms lasting over 25 years with traditionally lower interest rates than a bridging loan.

In summary, Mortgages are ideal for people looking to buy property to live in as Bridging Finance is more suited to developers and builders who are working on properties for a property portfolio.

No matter what type of loan you apply for, there are always risks involved and bridging loans for property developments are no different.

The team at Signature boasts some of the leading property finance experts in the UK, who can utilise their expertise and experience of the property market to assess your project and situation and help you come up with solutions to minimise your risk as much as possible. For advice or to book a no-obligation consultation with one of our advisers, call 0121 746 3130.

Build to rent is where a property developer builds new homes with the purpose of renting them out, making them the landlord on completion of the development.

By utilising development finance like that from Signature Property Finance, you can build properties for your rental portfolio and then use a buy to let mortgage to pay back your development funding and the rent will pay the mortgage.

If you have done your sums correctly, you will have a surplus monthly income stream for you as the developer, now acting as landlord.