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Category Archive finance

Best private property development finance options

By Sara Woods In , ,

Best private property development finance options

Property development finance plans for all types of developers

Getting into property development is not an easy decision. It requires a lot of planning, thought and finance in order to be able to pay for the development project.

But it is hard to get the financial backing for it. Many banks reject people based on their credit score and not believing there is potential for the property to do well.

It’s easy for developers to feel demotivated because of the lack of opportunities they have in order to pay for their property development

Hunter Finance is unlike traditional banks as they prefer an approach that focuses on potential and giving a quick ‘yes or no’ in order to get the property development started.

Am I eligible?

Hunter Finance doesn’t loan to only one type of person, they offer private property development finance to:

  • Private individuals
  • Property developers
  • Property companies
  • Building companies
  • Real estate developers
  • Commercial developers

Their customers are based around London, Sussex, Berkshire and other surrounding areas.

Unlike the traditional banks or other financial loan providers, their aim is to give everyone that is passionate about developing a property a fair chance to have access to the adequate amount of finance. Or perhaps, you need a mortgage broker.

How does the loan structure work?

Their loan structure works in a seven-stage cycle:

  1. Loan to value: They lend up to 60% of the money
  2. Foundations: Access to the first set of the funding so the work can begin
  3. Wall layout: The next stage of funding is released when the foundations have been checked
  4. Roof: Shell and the roofing of the buildings are checked
  5. 1st fix: Inserting the cables, inserting the water supple and constructing the walls,  checking the floors are complete, and ensuring the ceiling is finished completion
  6. 2nd fix: Having the electricians, plumbers and carpenters finish their final work
  7. Completion: The final funds are available to access in order to finish the property and prepare for the sale

For more information about the different methods of private property development finance, you can read ‘how to finance your property development’.

Making property dreams a reality

Through their multiple private property development finance options, they have loaned £75,000,000 to property developers so they can start the property development process.

Their property portfolio ranges from apartment buildings, detached houses, semi-detached houses and farm houses.

Contact us by email on sales@uk-life.co.uk

More

Getting into property development for the first time?

property development finance
June 23, 2021

Want to build? Finance options

By Sara Woods In , ,

Three types of development finance

The first thing to know about property development financing is that there is no such thing as a single model of financing for the entire industry.

There is, in fact, a vast array of different types and models and products of loan finance that exist to cater to the wide range of different types of developments and developers.

To work out which type of financing is most applicable to your potential development, let’s break down the three main types in the UK market:

1) Land Purchase and 100% Build Cost Loan

Development finance is one of the most common types of loan provided by alternative lenders. See lending criteria examples.

Upon successfully applying to receive development finance from a private lender, you could be eligible to receive capital equivalent to 60% of the land purchase cost and even up to 100% of the total build cost of the project.

This money would not land in your account all at once but would be drawn down in stages, requiring the sign-off of a site surveyor at each stage of the build.

2) Bridging Loan

These loans are an instrumental part of major property developments.

Unlike the loans made to developers to secure the land and building and labour costs of property development, a bridging loan is a short-term injection of cash into a project at a critical time.

The loan literally creates a bridge of funding between the expected finish of a build and the sale of a project that allows a developer to repay their original loan.

This bridging funding can cover unexpected delays in the building timetable, or cover the length of time it takes to eventually sell the property.

Some key features of the bridging loan are:

  • The loan can carry up to 75% of the property value
  • They can have fixed or variable interest rates
  • Interest can be paid monthly or at the conclusion of the loan

3) Mezzanine Loan

This represents one of the most complex types of property development loan, but also one of the most important.

Mezzanine loans (sometimes called Mezzanine debt) is usually quite an expensive form of fundraising as it presents a relatively greater risk to the lender.

This is a form of additional financing for a developer who is already subject to a mortgage with a bank and usually carries interest rates of between 10% and 30%.

It can be used to cover:

  • Unexpected overheads
  • Expanded development
  • Additional costs due to changes in planning permission
  • Costs arising due to delays

The major benefits of mezzanine funding are:

  • Immediate access to necessary cash
  • It is often listed as equity (rather than debt) on a company balance sheet, meaning greater access to future financing

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