Development Finance

Frequently Asked Questions

What is Property Development Finance?

Development Finance is a type of funding that allows you to build a house or houses, commercial units and other structures from the ‘ground up’. It also allows you to convert buildings into something else, like offices into apartments, a church into a house or convert an old Victorian terrace house into a HMO. In fact refurbishments and conversions make up the vast majority of real estate development projects.

Many developers use it to build housing estates on land after they have gained planning permission but it can also be used for the acquisition of the land.

Yes it is like a traditional mortgage but the major difference is, it allows you to buy a property or land without having to worry too much about your credit history and in almost every case, lenders will provide borrowers with an in principle lending decision.

You see, like a bridging loan, a development finance loan is based on the asset, in most cases property but also land. The land can be funded even if it has no planning in place (bridging loan – although here at Breeze Capital we only fund land with planning) or with full planning which will then allow a development finance loan to used.

There are over 300 different bridging lenders in the UK (yes, 300!) but only about 30 of them offer development finance…Some are major financial institutions like banks and some are specialist lenders you may have heard of like Aldermore or Shawbrook.

However, there are literally hundreds of smaller, alternative finance lenders who generally take more risks than the big banks and this allows them to lend flexibly against unusual or unmortgageable assets.

From a bridging loan perspective, it could be buying a house at auction. It may be buying another property before you have sold your existing one or it may even be because you want to buy a piece of land that doesn’t currently have planning permission.

For development, it may be that you have seen a piece of land, designed plans with an architect and submitted a planning application to build 3 or 4 houses.

Whatever the reason, development finance can be quick and relatively simple to apply for, if you know what you are doing. Lenders can be great to deal with when the application is packaged and presented to them perfectly but they can also be a nightmare if they feel the loan application looks amateurish.

How much can I borrow with Development Finance?

You can borrow anything from £100,000 right up to £50m, however as you can imagine, those lenders that offer lower loans of £1.5m like ourselves are very few and far between. If you are borrowing for ground up development finance, then those lenders become even more scarce.

Do banks offer Development Finance?

If only! Everyone asks this question but the simple answer is no, they don’t. The usual excuse is that offering development finance is riskier than offering a residential mortgage for example and we understand that.

However, if you choose the borrower carefully, the quality of the asset or security is good and you do your usual lender due diligence, then there is absolutely no reason at all why banks and other high street lenders shouldn’t offer property development finance.

Can you fund Modular Construction development?

Yes. Modular construction (also known as a Method of Modern Construction/MMC) is becoming increasingly commons because it is fast and economical. 

Is Development Finance expensive?

Compared to a normal mortgage then yes it is.

But you have to remember…These are risky products for lenders. Yes, if it goes well then both the borrower and the lender can earn a LOT OF MONEY. However, if they get the deal wrong then both the lender and borrower could be in a lot of trouble.

Do you charge broker fees?

No. We are lenders, not brokers.