70% GDV Property Development Finance

How is my maximum borrowing calculated?

With 70% GDV development finance, the maximum borrowing amount is calculated as 70% of the gross development value of the completed units.

While that may seem obvious, the calculation does go slightly deeper than that.

The starting figure is 70% of GDV, which is then worked backwards, with interest usually being deducted for the term of the loan. This leaves you with no monthly repayments to make.

From there, the stage payments are set aside for when they will be released, and fees are deducted.

Finally, this leaves you with your day 1 borrowing amount. Some lenders may restrict this further by capping the loan against a different metric.

This metric is either a day 1 loan to value cap – restricting the day 1 loan to a set percentage of the current value. The second potential cap is loan to cost. Loan to cost defines the maximum amount of the project cost that can be funded through finance, with the remainder coming from your own funds.

To calculate your exact maximum loan, get in touch and we will compare offers and let you know the best deal based on your circumstances.

Types of finance for property development

There are different types of finance that can be used to finance a property development project. They are:

Property development finance

The most common product is property development finance, which is used to fund ground up developments.

Development finance is a specialist product that is specific to property developers who are building new units from the ground up.

Property refurbishment finance

The second product is property refurbishment finance, which is used to fund property renovations and extensions.

This type of finance is used to finance the development and renovation of existing properties.

Bridging loans

A bridging loan can be used as a form of short-term finance to fund a renovation project or to purchase a new site quickly.

When buying at auction, consider auction finance for a fast completion.

How are applications assessed?

Applications are assessed as follows:

Developer experience

While we can fund projects for first time developers using first time developer finance, every lender will see experience in similar projects as a positive.

While your experience will be considered, it isn’t a deal breaker if you’re working with the right lender for your project.

Location

We can fund projects throughout the UK, but different locations require different lenders.

While some specialise in London based schemes, or other major cities, others are completely comfortable lending in remote locations or in Scotland or Northern Ireland.

Property type and viability in the local area

The property type will be considered within context of the local area.

For example, detached executive houses will be considered favourably in high end areas, but would be viewed with caution in a deprived area with little demand for such units.

Scheme profitability

While the profit goes to the developer, rather than the lender, lenders are still against funding projects without a strong profit margin.

This is because there is plenty of things in a development that can cause cost overruns and if a scheme is no longer profitable, there is little incentive for the developer to complete it.

Slim margins make a project more likely to slip into the unprofitable position should cost overruns occur.

Professional team

If you’re using a professional team to manage your build, the lender will look at the management, their experience and reputation.

How do I get started?

To get started, get in touch with the team at ABC Finance, and we will be able to get your application moving straight away. We can handle the whole process from finding you the perfect deal, through to managing the application through to completion.