Development Finance can be used towards the purchase and construction of residential and commercial properties.
Three main factors to consider when looking at Development Finance are:
- The expected Gross Development Value (GDV)
- The total Gross Development Costs (GDC), including purchase costs, development costs, professional fees, interest and fees.
- The loan term, including expected build and sales/refinance period.
The amount and finance terms available with depend on many factors including:
- The experience and track record of the developer.
- Location of the development.
- Design and specification of the development.
- Exit route including sale or refinance.
- Estimated build costs and professional fees.
- Profit margin
This will be considered against the amount of equity a developer can contribute and the loan amount compared to the GDV and GDC.
Typically, interest is capitalised to the loan and is repayable at the end, on sale or refinance. Consequently, the loan term can have a significant impact on the amount of interest payable.