Property Development Finance: Step-by-Step

Building or regenerating a big project? If so, you must decide on finance. The right property development finance is crucial for your project.

This article covers property development finance step-by-step:

Property development finance:

When might development require financing?

Property development finance types

Property development finance application.


Property development finance overview

Property development finance funds massive construction projects and renovations. New dwellings, office buildings, and larger redevelopment projects are examples.

It is not employed for smaller house renovations or property improvements. If so, there are additional bridging finance options.

When might development require financing?

Project size determines financing choices. Large projects require ground-up development money. This comprises land acquisition and construction funds.

Developers must raise 70–80% of the build cost

Instead of using financial reserves, a developer can use their property portfolio as security.

Planning construction:

The extent of property remodeling determines the financing alternatives. Construction includes:

Light redevelopment/refurbishment—Aesthetic, non-structural, internal reworking and upgrading of walls, ceilings, and flooring. Short-term auction or bridging loans can “turn-around” the property quickly.

Heavy renovations include structural alterations including additions and altering internal supporting walls. Short-term commercial mortgage finance or longer-term bridging finance are usually available.

Ground-up development entails site purchase, big blueprints, and a team of builders, architects, and tradesmen. Property finance requires many investment releases over months or years.

Property development finance types

It can be challenging to choose a project-specific financial option. Property development finance options include:

Commercial Mortgages

Used to buy offices, factories, and businesses. Commercial mortgages can buy non-residential property.

They act like a private mortgage, spreading payments over several years.


A little bakery rents but can be bought

Instead of paying high rent that can escalate, the bakery buys it and invests the money in a commercial property.

Most businesses can get a commercial mortgage, but a start-up may have a harder time. Lenders examine each case’s risk.

Auction Finance

Used by auction purchasers.

Most auctions have a payment deadline (up to 28 days). This sort of financing excels at providing big amounts of finance quickly.


A buyer must pay the auction house in full within weeks after buying a property at a discount.

They use auction finance to buy the house swiftly after raising the required deposit. They may have set the funding level beforehand or later.


A short-term loan that can “bridge” the gap between buying a home and getting permanent financing.

These last a few months but offer funding immediately. They help when buying property and renovating or developing it quickly (property flipping). They can be a short-term mortgage between auction and sale.


A developer finds a warehouse to renovate. It needs inside renovations but no big construction.

Bridging finance is best for short-term initiatives Informatics IMS. Their lender can finance the acquisition and renovation.

Property development finance application

Property development finance requires research. This requires thoroughly planning and overcoming any obstacles.

It’s crucial to prove your project’s profitability to property finance lenders.

If you are experienced in property development, you may be able to show a track record, but if you are new, lenders may be wary of you and your ability to handle large projects.

However, reliable and well-researched estimates based on criteria your lender would comprehend can make up for a knowledge gap.

Buy-to-let lending criteria

Buy-to-let lenders usually need a minimum income. The actual income criteria will vary from lender to lender, some can be high, others lower, but to ensure you have access to the entire market, it is wise to have a solid existing income.

Multiple houses and mortgages may prevent you from applying for additional. Portfolio finance may simplify property finance at this point.

Property yield determines lending

An income-generating property investment is crucial. The easiest approach to calculate how much revenue a property may provide is the rental yield conceptualhub.

Rental yield is a percentage of the property purchase price. After purchasing, investing, and renovating the property, your overall cost will determine how much you borrow, but the property yield calculation will determine which lenders will lend and at what rates.

GDV matters

Your Gross Development Value will underpin your property development finance application (GDV). It helps lenders evaluate your project. If the build expenses surpass 75% of the GDV or project value, many lenders may not approve the application.

Even if the lender loans 100% of the build cost, a good investment lets the lender loan 65% of the GDV.

Experience counts

Lenders value property development experience, even in modest projects. Good builders, planners, and architects help.

Property Finance Application Checklist

The finance provider will ask many project and financial questions. Before applying, consider everything.

Price, build cost, and expected value (GDV)


Detailed pricing

Schedules (including expected or possible contingencies)

“Property Development CV” – Professional team breakdown (builders, planner, architect etc.)

Planning approval (including restrictions)

Building regulations Project yield

Property lenders demand stable assets with strong rental yield. When seeking for property development finance, having a strong rebuild plan, considering setbacks, and knowing your property’s eventual worth pays off in the short and long term.

Finance possibilities depend on property developmentIf you would like to discover more please click here House Builders Finance to know more.

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