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Property development finance

nigel woollsey

Nigel Woollsey

Online Writer
Published: 20/03/2019

At a glance

  • Property development finance typically attracts higher fees than commercial mortgages
  • It may be possible to obtain a commercial mortgage for property development
  • Typically affordability and other related checks tend to be more stringent and demanding for property development

How does property development finance differ from a commercial mortgage?

Property development loans are a type of short-term lending that allows a developer to finance renovation or refurbishment of a property.

In the current tough economic climate you must be able to demonstrate very strong credentials to secure a loan, having one or more of the following:

  • A proven record of successful developments in the past
  • Agreed ‘off-plan’ buyer(s)
  • Already own the land and have planning permission
  • Can show that the development will service a strong rental demand where the building is speculative

Property development finance tends to have higher set-up fees than commercial mortgages. Money can be released in stages and repayments can be deferred until such time as you sell the property, or secure a commercial mortgage based on the final valuation after work has been completed.

You may be able to get a commercial mortgage that will lend on property development. However, the distinct advantage of a specialist short-term loan is that you may be able to get the funds you need quicker, over a shorter term (where the loan is easier to redeem if you intend to develop and sell).

Moneyfacts tip

Moneyfacts tip nigel woollsey

Look into planning permission as early as possible. Obtaining this from the local council can take a good deal longer than you might anticipate, whilst potential financiers will be encouraged if this is in motion or already in place by the time you approach them with details of your development plan.

workman looking at property plans

At a glance

  • Property development finance typically attracts higher fees than commercial mortgages
  • It may be possible to obtain a commercial mortgage for property development
  • Typically affordability and other related checks tend to be more stringent and demanding for property development

Moneyfacts tip

Moneyfacts tip nigel woollsey

Look into planning permission as early as possible. Obtaining this from the local council can take a good deal longer than you might anticipate, while potential financiers will be encouraged if this is in motion or already in place by the time you approach them with details of your development plan. 

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