Development Loan

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    Development Loan


    I have my own home plus 2 btl properties. The end goal is to design and build our own home.

    I’m at the early stages of research - checking land price in the area we like and looking at finance options. Because of the level of stamp duty ideally we’d like to purchase land with very little already on!

    The actual building side of things we have covered. I’m just wondering if anyone has done this with a development loan rather than a self-build mortgage? And if you’d mind letting me know a bit about how it worked etc. There isn’t really a lot about it online.

    my understanding is that some lenders will lend the full building costs subject to evidence that there’s an exit plan in place? For example evidence we have x savings plus the ability to get a mortgage on a residential property of that value.

    There are indeed Specialist short term lenders who will assist with development projects, but in the main only once Planning Consent has been obtained. Each lender has its own maximum level of development finance geared against the Gross Development value of the project. Interest can be rolled up or serviced on a monthly basis , it will however be of equal importance that you establish the ability of securing long term finance as the guaranteed exit strategy.
    Depending on the percentage loan involved interest rates are in the region of 0.7% per month with all the associated fees which normally incur a 2% Completion Fee, Specialist Valuation Fee and legal costs.
    I suggest that a timeline is created to show when funds against validated works are required , this will be important to avoid stress of overruns which seems to occur with most development projects.


      Thank you loanarranger that’s really helpful.

      I think I will need to have a hypothetical plan outline first with a timeline then think about the land etc. Working out if it’s a financially viable idea is really tricky.


        No problem if you need any further help or advice just let us know.



          I suggest you visit a large WH Smiths Store and buy a monthly magazine for self - building homes etc. You probably need to find a mortgage lender which makes advances by stages based on the height of the building.


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