Property Development Finance (UK, 2026): Rates, LTGDV/LTC & Calculator
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Author: Gary Hemming CeMAP CeRGI CSP
Last updated and checked on May 26, 2026 by Gary Hemming
20+ years experience in property finance
Development Finance at a Glance: Updated April 2026
- Typical rate bands: 0.65%–1.10% per month for residential ground-up schemes (approx. 8%–13% per annum); higher for commercial and mixed-use
- Max LTGDV: Up to 65% as standard; up to 70% for experienced developers on strong schemes
- Max LTC: Up to 85%–90% of total project costs, subject to the LTGDV cap taking precedence
- Interest structure: Rolled up and repaid on exit — no monthly payments during the build
- Funding timeline: Indicative terms in 24–48 hours; first drawdown typically in 6–10 weeks
- Arrangement fee: Typically 1%–2% of the gross facility
Development finance pricing is very much project-to-project dependent. The lender has to assess your track record, the specifics of the scheme, and its own risk appetite before making you an offer. This makes it very difficult to secure the right rate and the right deal for any project.
Top-tier banks like the National Wealth Fund and the British Business Bank only cater to larger, more established developers due to their low risk profiles. For smaller developers, commercial and mixed-use schemes, and complex site structures, there is a market of specialist lenders that are not easily accessible to everyone.
A whole-of-market broker like ABC Finance knows how to present your application correctly and which lenders to approach to give you the best chance to succeed.
What is Property Development Finance?
Property development finance is used for the construction or conversion of self-build plots, residential schemes, apartment blocks, and commercial ground-up schemes (offices, mixed-use properties, or industrial units). All ground-up development finance projects that fall outside the scope of standard refurbishment finance are serviced through property development finance.
Compared to a commercial mortgage, property development finance is usually a short-term product. The loan is assessed based on the value of the finished property, also known as its Gross Development Value (GDV). Secondly, with this product, the entire amount is not released at once but rather in tranches based on verified milestones in the construction process.
This reduces the interest burden as only the amount drawn bears interest, and the final repayment only happens after the completed unit is either refinanced or sold.
At ABC Finance, we help you connect with the full spectrum of development lenders and find the right lender best suited to your experience level, project type, and exit strategy.
Latest Property Development Finance Rates & Costs 2026
Development finance is priced monthly. Apart from the headline rate, there are arrangement fees, valuation costs, legal fees, monitoring surveyor fees, and sometimes even an exit fee.
Current Rate Bands: Updated April 2026
Method: median indicative terms across 40+ UK development lenders. Rates are indicative and subject to lender assessment, borrower profile, and project type.
Bank of England base rate at the time of writing: 3.75%.
Residential Development Finance: Ground-Up New Build
| LTGDV Band | Experienced Developer | First-Time Developer |
|---|---|---|
| Up to 55% LTGDV | 0.65%–0.75% per month | 0.85%–1.00% per month |
| Up to 65% LTGDV | 0.75%–0.90% per month | 0.95%–1.10% per month |
| Up to 70% LTGDV | 0.90%–1.05% per month | 1.05%–1.25% per month |
Conversion & Refurbishment Finance
| LTC Band | Rate Range |
|---|---|
| Up to 70% LTC | 0.70%–0.85% per month |
| Up to 80% LTC | 0.85%–1.00% per month |
| Up to 85% LTC | 1.00%–1.20% per month |
Commercial Development Finance: Ground-Up & Mixed-Use
| LTGDV Band | Rate Range |
|---|---|
| Up to 60% LTGDV | 0.80%–1.00% per month |
| Up to 65% LTGDV | 0.95%–1.15% per month |
Note: Residential schemes in London and the South East typically attract tighter pricing than regional equivalents. Sales-led exits (off-plan reservations, pre-sales) are rewarded with better rates than refinance exits. Commercial and mixed-use projects carry higher risk profiles and are priced accordingly.
Total Cost of Development Finance
Apart from the monthly interest rates, there are several other fees to be taken into consideration:
- Arrangement fee: 1%–2% of the gross facility
- Monitoring surveyor fee: £750–£3,000 per site visit (typically added to the loan)
- RICS valuation fee: £500–£4,000+ depending on scheme size
- Legal fees (borrower’s + lender’s solicitors): £5,000–£12,000 combined
- Broker fee: approximately 1%.
- Exit fee: Some lenders also charge a 1% exit fee, calculated on the gross loan or GDV.
Overall, a 12-month development facility might incur a cost of anywhere between 8% to 15% of the gross loan amount.
A note on interest roll-up:
While standard mortgages involve monthly repayments, development finance repayments are accrued on only the balance drawn as on date, and are rolled up only at the end of the facility as a one-time payment. This is done so as to preserve cash flow during the development, at a point when the developer needs it the most.
Let’s take an example. For a £1m facility drawn in four equal tranches at months 0, 3, 6, and 9 of a 12-month facility at an interest rate of 0.85%, the total interest works out as:
£250,000 *0.85%*1 + £250,000 *0.85%*9/12+ £250,000 *0.85%*6/12 + £250,000 *0.85%*3/12
= £5,312.5
Now consider a regular mortgage where the entire amount is drawn at the time of the initial loan. The total interest at the same rate would be
£1,000,000 *0.85%
= £8,500.
As you can see, the interest accrued was considerably lower in the roll-up scenario, despite the same overall facility size. An optimally designed drawdown schedule can save you significant roll-up interest.
Development Finance Calculator: Estimate Your Borrowing
Development finance lenders usually consider three constraints to decide how much advance can be given, and the tightest among them ends up being the actual loan. Our property development loan calculator below will help you get a sense of what your costs might be before approaching the market.
How LTGDV vs LTC Affects Your Loan Amount
The main consideration is Loan to Gross Development Value (LTGDV). The lender arrives at an open market value of your finished project using a RICS valuation and comparable projects in the area. The LTGDV is expressed as a percentage of this value.
While typical LTGDV is in the range of 60%-65%, experienced developers building projects in well-located areas might get lenders to stretch LTGDV to 70%.
The second consideration is Loan to Cost (LTC). While LTGDV pegs the loan facility to the finished value of the project, LTC does it to the project cost. These may include build costs, land purchase costs, professional fees, finance costs, and contingency.
Typically, lenders provide 85%-90% LTC, but the LTGDV cap takes precedence.
The final parameter is the day-one land advance. Lenders release 60%-70% of the site value on land acquisition. The remaining is drawn down in tranches based on achievement of project milestones.
Below is an example of how these constraints work in a typical scenario.
Assumptions:
- Interest rate 0.85% per month (rolled up),
- LTGDV cap 65%,
- LTC cap 85%,
- 12-month term, experienced developer
| GDV | Total Cost (Land + Build) | Max Loan (LTGDV 65%) | Max Loan (LTC 85%) | Actual Loan (Lower of LTGDV and LTC) |
|---|---|---|---|---|
| £500,000 | £350,000 | £325,000 | £297,500 | £297,500 |
| £1,000,000 | £780,000 | £650,000 | £663,000 | £650,000 |
| £2,000,000 | £1,300,000 | £1,300,000 | £1,105,000 | £1,105,000 |
| £3,500,000 | £2,200,000 | £2,275,000 | £1,870,000 | £1,870,000 |
| £5,000,000 | £3,100,000 | £3,250,000 | £2,635,000 | £2,635,000 |
As is clear from the above table, the LTC constraint most often becomes the deciding factor in property development finance. But it is always better to model both constraints before approaching a lender.
At ABC Finance, we work out these numbers with you before approaching a lender, to give you a realistic picture of your capacity to borrow before any application is processed.
The Staged Drawdown Process: How Funds Are Released
Unlike most other types of finance, development finance loans are not released in a single lump sum. This often catches newer developers off guard. It’s important to understand the staged drawdown process before approaching any lender.
Typically, on the day the land is acquired for the project, the lender releases about 60%-70% of the total land value. At this stage, there is no monitoring surveyor inspection to be carried out.
Subsequently, as and when the project achieves predetermined milestones, further tranches of the facility are released. These milestones are usually things like laying of foundations and slab, completion of structural walls and frame, roof and watertight, electrical and plumbing work, second fix, and of course completion.
As each milestone is achieved, the developer places a drawdown request with the lender. A monitoring surveyor visits the site and assesses the progress. Based on the surveyors’ certification, the lender releases the next tranche. Usually, the release happens within 24-48 hours of the surveyor’s certification. As soon as the drawdown is released, it starts accruing interest. However, no payment is necessary until the project is completed.
This process incentivises timely project completion. The quicker the project is finished, the less interest is accrued on the amount drawn, making the project more profitable.
Monitoring Surveyors and Tranche Timing
Central to this whole process is the Independent Monitoring Surveyor (IMS). While the IMS is decided on by the lender, the survey process actually gets paid for by the borrower.
The IMS provides the lender with project updates and confirms whether the borrower’s claim of milestone completion is correct as per the specifications provided. They are also responsible for certifying whether the project costs are within the approved budget and that sufficient contingency funds are available to ensure completion of the project.
Approval from the IMS is mandatory for the release of the next tranche of the facility. Any concerns or red flags from them might lead to tranches being reduced or withheld entirely until the issues are resolved. This is not entirely unusual, and developers should build this possibility into their project plan.
Surveyor fees can be anywhere between £750–£3,000 per site visit, depending on the size and complexity of the project. For a project with six to eight drawdowns, the total IMS fee might reach anywhere between £6,000 and £18,000 overall. These numbers need to be incorporated into LTC and total project cost calculations at all times.
The survey process might take anywhere from six to ten weeks, depending on the time taken for RICS valuation, generating the IMS report, and legal work, though the timeline is shorter for smaller projects.
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Eligibility Criteria for UK Developers
Eligibility criteria for a development finance project vary significantly from project to project. However, here are some typical criteria that are applied in nearly all cases.
Developer experience
Across the entire spectrum of lenders, developers who have prior experience in completing similar projects get preference in both terms and rates. While this doesn’t mean that newer developers can’t get loans, the fact is that there are fewer lenders willing to work with them, and usually the rates are between 0.25%–0.50% higher. Moreover, newer developers get stricter LTGDV caps (often between 60%-65%), as well as LTC caps (80%-85%). In most cases, lenders require first-time developers to take on an experienced development consultant or project manager, and sometimes, they are asked to appoint a professional main contractor instead of self-building.
Planning permission
For ground-up development, lenders strongly prefer full planning consent. While some lenders might be willing to consider only outline permission, the terms are more stringent in such cases.
Exit strategy
There are two main types of exits: a sales exit happens when all constructed units are sold out to repay the debt, and a refinance exit happens when the completed project is retained by the developer and gets refinanced onto a long-term mortgage. In either case, the exit plan must be clearly specified and deemed credible by the lender.
Sales exits usually attract better terms than refinance exits. Having a strong exit strategy is one of the most important aspects of getting any application approved.
Project viability
Lenders assess viability during the development appraisal. In most cases, the lender has to be convinced that there is a strong margin of safety between the total project costs and the projected GDV. In residential schemes, a minimum profit margin of 15%-20% is necessary. The lower the margin, the less the likelihood of funding.
Borrower structure
These days, lenders are increasingly preferring SPVs, which isolate the costs and liability from the developers and simplify underwriting. However, almost any type of borrower can be acceptable, including sole traders, partnerships, limited companies, and LLPs. In nearly all cases, the firm’s directors need to provide personal guarantees.
Credit history
Most lenders shy away from projects where adverse credit history is involved, but this does not mean that such projects are ruled out entirely. There are specialist lenders who are willing to consider applications with a strong case despite the historic credit issues. A whole-of-market broker like ABC Finance can help you figure out the right lenders who might be open to such cases.
Minimum loan sizes
Most lenders will not fund projects below £250,000–£500,000. However, there are a few specialist lenders who are willing to consider smaller schemes. Upper limits vary, with large schemes from experienced developers getting access to even £50m or upwards through institutional lenders.
SME housebuilders
Homes England’s Home Building Fund has recently launched a new SME Accelerator Loan offering a route for qualifying developers building five or more homes on a single site in England. This is a government-backed scheme that can work in tandem with private development finance and offer better leverage or help reduce developer equity.
100% Development Finance: Is It Possible?
While it’s not a mainstream practice, there are two ways a developer can operate with zero cash equity: through joint ventures and mezzanine finance stacked on top of senior debt.
In the joint venture model, the developer’s equity is replaced by an equity investor or a financial partner who takes a share of the profit in return. For example, if the development finance partner provides 65% of LTGDV, the remaining 35% gets put up by the joint venture partner. The developer gets to keep operational control of the project, but must share a portion of the profit margin with the investor. Joint ventures are more common in large projects where experienced developers are involved.
Mezzanine finance is an instrument that helps fill the gap between a senior development loan and the developer’s equity. Instead of replacing the developer’s equity in the project like a joint venture partner, mezzanine financiers provide funding over and above what the senior lender is willing to offer.
For example, if the senior development financier is providing 65% of LTGDV, the mezzanine lender may provide additional funding up to 85% – 90% of the LTGDV. The catch is that the funding is at a higher rate, typically 1.25% to 1.75% higher, because of the higher risk profile.
So, the overall blended cost of the senior-plus-mezzanine stack goes up, and needs to be carefully appraised in order to ensure the scheme remains profitable.
Usually, mezzanine finance only makes sense in cases where the profit margins are quite healthy, and the expected GDV is quite strong. In such scenarios, it may be more lucrative to acquire cash at a higher leverage because it will be offset by the returns.
Mezzanine finance is also useful if the developer has multiple schemes to finance and does not wish to tie up their cash in a single development. It is a means of getting capital efficiency rather than a debt product.
An experienced broker is absolutely pivotal for presenting layered facility scenarios like these to lenders. At ABC Finance, we help arrange both joint venture and senior-plus-mezzanine structures for UK developers.
Exit Strategies: Finish and Sell vs Finish and Refinance
One of the most critical parts of a development finance loan is the exit strategy. Lenders will not accept any case that portrays a weak or unrealistic exit scenario. Such cases are either rejected outright or heavily riddled with conditions. So it is important to have a clear understanding of the two main exit mechanisms and their implications on the way your facility will be priced and structured.
Finish and sell
Lenders almost always prefer a sale exit because it provides a clear path to repayment. Applications that use this exit strategy are evaluated on clear evidence of demand, such as sales of comparable properties in nearby areas and off-project reservations. Evidence of pre-sales is the best way to get the most favourable terms. If there are no pre-sales, the market evidence provided by the developer will be scrutinised, and the lender may end up applying more conservative GDV assumptions.
In some cases, the development facility may expire before all units of the project are sold. In such scenarios, developers often use a specialist bridging loan to fill the gap and repay the primary loan, extending the timeline of the project at a lower rate. This is quite common for large projects in locations that have a longer sales cycle.
Finish and refinance
Developers who wish to retain their investment in the property after the project is completed use a refinance exit. In this case, the loan is repaid using either a buy-to-let product or a new commercial mortgage. Lenders scrutinise such cases for evidence of achievable market rents that will allow for refinancing. Developers should consider getting a lender to provide indicative refinancing terms before applying.
Apart from these two approaches, there is also a hybrid option: selling part of the project while retaining the rest for rental income. In such cases, the sold units should be able to provide enough capital to repay the full facility.
At ABC Finance, we help developers at all stages of finance – from initial to exit and even subsequent refinancing. We ensure that your exit is clearly planned out from day one, so that there is a clear path forward for all parties involved.
Why Use a Development Finance Broker in the UK?
Development finance is a bespoke product. There are no standardised rates or published lending criteria anywhere. In such a scenario, knowing which lender to approach can be the difference between not just application approval but also project success as a whole.
A whole-of-market development finance broker in the UK can help you meet the right lender for your project, whether it is high street banks or specialist boutiques. They know which lenders are most likely to consider which type of project, will entertain what experience level, and what evaluation criteria they are likely to look at most closely.
This is especially true for residential development finance, where each lender can have a range of lending appetite, permitted LTGDV, and developer experience criteria.
At ABC Finance, we run your numbers before approaching any lenders, help you choose the right lender for your project, and manage the due diligence process.
Note: All rate figures quoted are indicative as of April 2026 and based on market data compiled across 40+ UK development lenders. The Bank of England base rate at the time of writing was 3.75%. Rates, LTV caps, and lender criteria change regularly and vary significantly based on project type, borrower profile, and individual lender appetite. Nothing in this article constitutes a mortgage offer or financial advice. Your property may be repossessed if you do not keep up repayments on a loan secured against it.
About the author
Gary Hemming CeMAP CeRGI CSP
20+ years experience in property finance
This content was produced by our Commercial Lending Director, Gary Hemming. Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business press as well as local and national press.
