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).