Development exit finance is used to repay outstanding property development finance. once the project is nearing completion.
They are a type of bridging loan and are usually offered with rolled up interest for the full term of the loan.
These loans can usually be offered once the building is wind and watertight.
There are three main reasons why this type of finance is attractive:
This type of funding takes advantage of the fact that the level of risk decreases significantly as the project nears completion. As such, a new lender is generally happy to pass on the savings associated with a lower risk application to you, the borrower.
Options for development exit finance come from our extensive panel of lenders, and our bridging loan rates start at 0.43% per month.
The rate charged depends on a few factors, with loan to value (LTV) being the main driver and the strength of your chosen exit strategy also being very important.
At 50% LTV, rates of 0.45% and below are common, with rates of 0.65-0.7% being the norm at 75% LTV.
The interest charged will be quoted based on the full term of the loan, but where your facility is repaid early, you will usually have any unused interest refunded.
On top of the interest charged, you will be faced with a number of fees when setting up a new loan. The main ones are the following:
Lender arrangement fee – these fees are charged by the lender for setting up the loan and are generally payable on completion. This fee is usually 1-2% of the loan amount and can be added to the loan in most cases.
Broker fees – Some lenders charge a fee for using their service (we don’t). These fees can be as much as 1.5% of the loan amount.
Lender exit fee – Although these fees are becoming less common, some lenders charge an additional fee when the loan is repaid. Where this is the case, it is usually either the cost of 1 month’s interest, or 1% of the loan amount.
Valuation fees – As the properties are new, automated valuations aren’t usually possible, meaning a chartered surveyor must visit the property and produce a report. This fee is usually charged early on in the application process.
Legal fees – You are usually responsible for both your own and the lenders legal expenses in arranging the loan. These fees are usually paid once the formal offer has been issued.
We can arrange finance from £25,000, with no maximum loan.
We can usually arrange up to 75% loan to value on residential or mixed-use schemes and can even push to 80% for certain residential developments. We can fund up to 85% LTV for some property refurbishment finance projects.
The maximum loan offered is based on both the LTV and the ability to exit the loan safely. For example, should the LTV limit of a chosen product be 75%, but your exit strategy could see you unable to raise this much, your loan amount would be reduced.
This tends to only be an issue where the chosen exit strategy is by way of refinance to a term loan.
We can offer funding with the interest paid monthly, or rolled-up into the loan each month, leaving you no monthly payments to make.
Should rolled up interest be required, it is simply repaid at the end when the loan is repaid.
We can offer loans to individuals, partnerships, LLPs, Ltd companies, offshore companies and pensions.
Loans to non-UK nationals, expats and foreign nationals can also be offered.
Yes, we can lend to first time developers without issue.
Not always, we can offer funding before practical completion sign off. Once the property is wind and watertight, you will be able to access the lowest rates in the market and start saving on finance costs.
Where this is done, we can often agree upfront with the lender to release further funds based on the value uplift on practical completion sign off.
We can complete applications very quickly. However, it makes sense to allow yourself time for the process to go through. A month should be more than sufficient for this.
We are happy to discuss your project far earlier than this to give you prices based on today’s market, to allow you to correctly cost your project.
The underwriting process is actually quite straightforward, with minimal information being required to supply funding.
Although it varies from application to application, we will generally require the following:-
Yes, the lender will almost always want their own valuation, and with the properties being new build, an automated valuation isn’t possible.
Where your current project is being tracked by a monitoring surveyor, we may be able to use them for the new application – if they’re on the new lenders panel. Where the current lender is using a QS to monitor the scheme, a new valuation report will be required.
Lending is based on the current market value. On part complete loans, the property will naturally value at less than the GDV.
These schemes usually value at the GDV, minus the cost of remaining works and some profit, based on the level of works remaining.
Unlike development finance, which sees all sale proceeds used to repay the loan amount, development exit lenders are generally happy to allow you to keep a proportion of the sales proceeds.
This allows you to control your cash flow during the sales process and move forward with your next project.
Of course, if you would prefer to repay the loan as quickly as possible, you can use 100% of any sales to reduce the loan balance.
We can usually complete development exit finance applications in 7-14 days. Our development finance experts will usually be able to quote an estimated completion time for your project during an initial conversation.
Where funds are needed urgently, we can generally work to your timescales to ensure that funds are there when you need them.
There are four main reasons, they are as follows:-
Although there tend to be more options available for projects that have practical completion, we can generally get very low rates as soon as the project is wind and watertight.
There is some variance on this on a project-by-project basis. We’re always happy to talk this through to let you know the rates you’d be eligible for on your scheme both now, and when you reach practical completion.
These loans are usually subject to daily or monthly interest, with the interest only due for the period that the funds are drawn.
This means that you will start saving on interest as soon as you pay off part, or all of the loan.
Exit penalties aren’t usually included in development exit loans.
