Can I lend money for development too?

You get a bridging loan for property development by using it to buy or hold land or property at a pre-planning or acquisition stage, rather than to fund construction. Lenders require property security, acceptable loan-to-value, and a clear exit strategy, usually a refinance onto development finance or a sale once value is added.

Development finance is funding for property development projects such as new builds, renovations and conversions. It covers the construction costs and the other costs of the scheme, and is released in stages as the work progresses.

A development exit loan refinances a completed scheme's development facility while units remain unsold, usually at a lower rate, with sales proceeds paying down the loan unit by unit. It gives the developer time to sell before the development lender's term expires. On a hotel or other trading asset it bridges the period until trading supports a term mortgage.

A development loan is a short-term funding solution designed specifically for property developers who are building, refurbishing, or converting residential or commercial properties. Unlike traditional mortgages, development finance is released in stages and structured to match the cash flow needs of a construction project.

The loan typically begins with an initial advance used to purchase the land or property. After that, funds are released in tranches, known as drawdowns, as the development progresses. These drawdowns are usually approved after inspections by a monitoring surveyor who confirms that construction milestones have been met. This staged approach helps control risk for both the lender and borrower.

Interest on a development loan is normally only charged on the money that has been drawn down, not the full facility. This means your borrowing costs start low and increase as more capital is released. Borrowers can choose between serviced interest (paid monthly) or retained interest (deducted upfront from the loan amount).

Lenders usually assess the loan using a Loan-to-Gross Development Value (LTGDV) ratio, typically up to 75% of the final value of the completed project. In tighter deals, mezzanine finance can be used alongside senior debt to increase leverage up to 95% of total costs (LTC).

A clear exit strategy is essential, whether through selling the completed units or refinancing onto a long-term product such as a buy-to-let mortgage or commercial mortgage. If additional time is needed post-build, developers may opt for a development exit loan to repay the original facility while waiting to sell or refinance.

A rural development mortgage is used to finance land or property in rural areas intended for development, with lending decisions based on planning status, site suitability, and end value.