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Property development is a crucial area for the UK economy. And whilst we are all familiar with the large house builders, much of the property development in the UK is carried out by small and medium sized developers and housebuilders.

Property development falls into several different categories including:

  • new build projects;
  • conversions;
  • refurbishments; and,
  • extensions

Regardless of the type of project or scheme you are looking to undertake, whether you are an experienced developer who has carried out many projects before or you are a first-time developer embarking on your very first project – property development funding is available.


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How does finance for property development work?

Property development finance enables developers to acquire property or land (if they don’t already own it), whilst also providing the additional funds they need to carry out the actual development work, prior to the developed property then being sold or rented out.

When it comes to property development, there are essentially three types of finance:

  • senior debt finance
  • equity finance
  • mezzanine finance

Senior debt finance is the main loan to assist with the development project. The lender providing the senior debt will typically require a first legal charge over the freehold of the property being developed.

Equity finance is the cash that you put into the deal yourself. It is effectively your equity stake into the deal. It normally takes the form of a cash injection, however, as an alternative to an injection of cash you may be able to offer another property you own as additional security which the lender offering the property development finance will take a charge over.

This could be a first or a second charge depending on whether you have an existing mortgage on the additional security property.

Mezzanine finance is usually only available on new build projects. It is the funding that sits in between the senior debt and the equity finance.

Mezzanine finance is an ideal option if you have insufficient cash to inject into the deal and can be the difference between a development project proceeding and not going ahead.

When it comes to property development finance, there are many options with lenders all offering different funding solutions.

As brokers, we specialise in arranging both debt finance and mezzanine finance.

To discuss your development project and find how we can assist you raise the funding you require to carry out your project, please give one of our property development finance brokers a call. For other options, learn more about bridging loans and finance for property investment.

Acronyms You Need to Know

LTGDV – Loan to Gross Development Value – This ratio relates to the amount of the loan compared to the gross development value i.e. the end value of the project once the build works are completed.

LTC – Loan to Cost – This ratio relates to the amount of the loan compared to the combined value of the property when it was purchased, and costs associated with the build (this includes any interests costs for the finance and arrangement fees).

LTV – Loan to Value – A common ratio used in mortgage lending in general. And this is essentially the amount of loan compared to the current market value of the property.

Alternatively, you could start by taking our Property Developers Fundability Scorecard.

The Property Developers Fundability Scorecard gives you an analysis of how FUNDING READY you are by benchmarking your next development project against five key metrics.

All you need do is go here:

  • Answer 30 YES/NO Questions;
  • It takes less than 10 minutes;
  • When done, we’ll send your Fundability Scorecard Report; and,
  • You can discover how you’ve scored and how FUNDING READY you are when it comes to your next project.