Property development financing is a form of commercial financing that can facilitate the development of large-scale commercial, residential, and mixed-use property. It is a broad term that covers various types of development finance, including bridge mortgages and remortgages.
Property development financing includes a range of mortgage solutions for property developers, housebuilders, homeowners and more. These financing methods cover both the residential and commercial construction sectors in the UK, provide the capital needed for the project and are often critical to the success of development investment. Development financing can be used to finance a wide range of construction investments, including:
- Residential development for new large or small construction projects
- Financing the purchase of land
- Buying or renovating a property
- Build commercial projects – build new, convert or change land use
- Provide construction costs
Buying a property at a low price and developing it can increase its value enough to make a significant profit or allow buyers to remodel the property specifically to their liking. But understanding exactly how it works and how to get it is crucial to starting development project plans.
What does development financing offer?
Several types of development can be funded, each different targeting type of development.
- Small property development may require a cosmetic renovation without work on the structure. This could be for the possessors to make better use of their property or increase its value before selling it.
- Lenders should also have plans for property redevelopment that requires heavy structural work. These types of projects can greatly increase the value of your property. However, some borrowers are looking for financing for long-term investment goals.
- Applying for a rental investment is popular with investors looking to own a house, where borrowers take out a mortgage to renovate a property and rent it out instead of selling it.
- Finally, development finance options can help finance large projects ranging from conversion projects to new construction. The potential return on these projects is enormous and attracts many investors.
How to access property development financing?
You can apply for property development financing through several private projects or channels. In some cases, you may need the help of professional mortgage advisors, but it is better to try to know what kind of development you want to do in the first place.
Application for development financing is different from traditional mortgages. Lenders usually assess the property’s value and then offer the mortgage based on it and the borrower’s eligibility. For development mortgages, lenders also assess the property’s estimated value after the development project is completed.
To apply for development finance, developers must also submit a request stating the amount to be paid for the property, development costs, professional costs and building schedule. Based on this information, a list of lenders’ conditions must be agreed upon before proceeding with the credit review. Borrowers must also carefully evaluate their credit score and address its negative points before applying. Even after the mortgage is approved, the lenders supervise the borrowers throughout the project.
What documents does the borrower need to receive a development mortgage?
Documentation is a big part of any financial plan and also development financing. Considering the mortgage and the property’s future value, the lender may demand more documents from the borrower. Before talking to a lender, a developer should usually provide the following documents. Lenders, however, will receive different terms depending on the case.
- The current value of the property (if owned) or its purchase price
- Estimated final value of the property, along with documents
- Building and renovation costs
- Development schedule
- Portfolio or CV of experience in development projects
- Information of other experts involved in the project
- A copy of the license
- Information on building regulations
Does the borrower need a broker to get a development mortgage?
New construction projects – regardless of scale – require a heavy investment that may not be available, or investors may want to take it immediately. SWG Mortgage advisors’ knowledge in this area helps investors identify the best financing solution and easily carry out their property development projects.
Demand for new buildings is growing, but it is difficult to get mortgages from traditional lenders. This is where SWG Mortgage advisors come in handy to help you find the right property development mortgage for your project. SWG Mortgage’s customised approach means that the development financing solutions are tailored to your specific needs. The goal of SWG Mortgage advisors is to expedite projects under renovation or construction of your property.
SWG Mortgage provides services for experienced property developers, homeowners, or novices. Even if you have just started your first construction project, SWG Mortgage experienced advisors are ready to guide you through the various stages of getting a mortgage and can provide you with a detailed evaluation of customised and indicative terms.
