What is development finance?

Development finance is short to medium term funding used to cover the purchase of a site and the cost of building works. It is commonly used for ground-up developments, conversions and heavy refurbishment projects where a standard mortgage is not suitable.

How the funding works

Lenders typically release an initial advance towards the purchase of the land or property, with the build costs drawn down in stages as the project progresses. Each stage payment is normally signed off by the lender’s monitoring surveyor. The terms available are shaped by the strength of the scheme, including planning permission, build costs, the projected end value and the experience of the developer.

Repaying the loan

Development finance is usually repaid when the finished units are sold, or by refinancing onto a longer term product such as a buy to let or commercial mortgage. Having a clear exit route in place from the outset is central to securing competitive terms.

Expert advice

SM Finance’s specialist team will take the time to understand your scheme and approach the lenders best placed to support it, from high street banks to specialist development funders. Call us on 020 4511 9511 to discuss your project.

Development finance is generally not regulated by the Financial Conduct Authority. Your property may be repossessed if you do not keep up repayments on a loan secured on it.