Property Development Mortgages
Property development is a thriving business that offers many opportunities to build relationships with local surveyors, architects and legal minds. Establishing homes through flats, apartments and houses, your property developments truly impact the lives of those they house. It’s fair to say that property development is big business, involving huge sums of money just to get projects off of the ground. Here at Avail Mortgages, we seek to help investors, property developers and landlords expand their property portfolio by referring them to third-party specialists that can help with property development mortgages that can truly make a difference.
Using their expertise, our specialist third-party can advise you on repayment options, and make you aware of any fees, rates and costs associated with your project – they are industry experts whose in-depth knowledge of the market is trusted by property developers across the UK, as well as reputable mortgage lenders and our clientele.
For more information on Property Development Mortgages, and to speak to our mortgage advisers, please contact us today. We provide loan support and mortgage advice for clients in areas such as Leeds, Huddersfield, Bradford, York, and Harrogate, as well as the rest of the UK.
Getting A Mortgage For Property Development
A Property Development Mortgage, also known as development finance, is used to help fund large property ventures such as multi-unit blocks, apartments and plots of land on which you aim to build multiple properties. Also used for property conversions, renovations and regeneration projects, Property Development Mortgages can help provide property developers, investors and landlords with the finances they need to turn a pretty profit.
To help you get a mortgage for property development projects, the following steps are usually taken, but please note that this may differ slightly depending on your circumstances and the lender:
The advisor will likely conduct a fact find to learn about your property development, allowing them to appraise it and source suitable possible mortgage rates from an array of mortgage lenders.
You’ll receive details about indicative terms, and any possible costs and fees.
Should you agree to the indicative terms, we’ll start compiling the property development proposal and submit the mortgage application to the chosen mortgage lender. Information that you may be asked to provide could include:
- Evidence of previous development projects.
- Details of the planning consent including any restrictions, Section 106* or Community Infrastructure Levy requirements*.
- Drawings / plans.
- Full breakdown of the development costs.
- Expected end value of the project (known as the Gross Development Value).
- Financial accounts.
- Proof of identity.
- Exit strategy (e.g. sale or refinance).
Mortgage lenders typically like to meet the property developer to understand the project in greater detail and therefore, we can arrange a site visit between yourself and the mortgage lender.
Following the site visit, a report on the property development project is usually submitted to aid the underwriting process. Should this be successful, and your mortgage application approved, your mortgage lender will issue a formal loan facility offer, which will detail the Property Development Mortgage, as well as interest rates, costs and fees.
A valuation report may then be carried out by a property surveyor, who will comment on aspects of your property development, such as:
- The value of the site in its existing condition.
- Predicted build costs.
- Anticipated gross development value.
- Exit strategy – sale or rental potential on completion of the project.
Following instruction from your solicitor, the mortgage loan application will be completed and the development finance arranged. The loan funds will start to be released, with interest only payable on the money used.
When the property development project is completed, should the loan facility have an exit fee, this will need to be paid to the mortgage lender by the agreed-upon date.
What Mortgage Do I Need For Property Development?
When it comes to Property Development Mortgages, the amount you can borrow is based on the gross development value (GDV) of the finalised project. The GDV is the value of what your development will be worth at the end of the project. Mortgage lenders usually provide up to 60-70% of the GDV and up to 75-80% of the total cost involved.
The duration of the mortgage loan is based on the scale and nature of the property development. The longer it takes to repay the loan, the more interest is charged, as interest is usually charged on a monthly basis. Interest can also be repaid at the end of the mortgage term – known as an interest only mortgage*. It’s not uncommon to repay the loan in full by selling the property development, or by taking out another mortgage.
Property Development Mortgage Rates & Fees
When it comes to Property Development Mortgages, there are a range of costs and fees to consider*, and these include:
- Arrangement Fees: Arrangement fees are charged by mortgage lenders for arranging the loan and usually cost 1-2% of the property loan amount.
- Exit Fees: Exits fees are paid to the mortgage lender to close the loan. Exit fees may be charged as a percentage of the loan amount, or as a percentage of the gross development amount. Exit fees on development finances cost approximately 2%.
- Valuation Fees: As part of the mortgage application and risk assessment process, mortgage lenders will instruct a property surveyor to place a valuation on the property.
- Interest Rate: The monthly interest repayments on the Property Development Mortgage loan can vary as the development of your apartments, multi-unit blocks, plots and land and property develops. As more funds are released, the monthly interest repayments may increase.
- Professional Costs: It’s a given, but you’ll need to use other professionals during your property development project, such as architects, quantity surveyors, solicitors and project managers.
At Avail Mortgages, we can put you in touch with a trusted third-party who will help to find suitable rates for property development projects of all shapes and sizes, ensuring the Property Development Mortgage is extensive and covers your needs. Contact us today to find out more.
Get In Touch
For help with your Property Development Mortgage, we recommend getting in touch with Avail Mortgages today. Our mortgage brokers deal with enquiries from those in our surrounding areas of Leeds, Huddersfield, Bradford, York, and Harrogate, as well as all over the UK. For assistance, please contact Avail Mortgages today.