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Property Development Loans Should Not Be Rushed Into If You Want The Cheapest

Feb 15, 2008
If you want the cheapest and best deal when looking for property development loans then you should not rush into it. You can take a loan when it comes to property development from the high street lender. However in the majority of cases this is not the cheapest way to take out a loan. You can get a loan tailored to your specific needs if you go with a specialist.

A specialist will have the advantage of having access to lenders that you do not. As such they are able to search with the whole of the market place to find you the cheapest rates of interest and the most attractive deal. Property development loans can be taken out if you are developing property on a commercial or residential basis. Each loan and the terms that come with it are assessed on the individual applying for the loan. The rate of interest will be based on the experience in property development, past success, the sector at the time of going for the loan and what you are proposing.

As a basic guide the rates of interest associated with property development loans are between 1.5% and 2.5%. A broker will from past experience know which lenders are more than likely to offer you the best deal based on your proposal. If you have worked with a broker to put your proposal together then it will have validation and as such the project will get off to the smoothest start possible.

Lenders usually work quicker when it comes to finalising the loan and the two are able to negotiate when it comes to the terms and conditions set out in the loan. The amount you are able to borrow for your project will be based on the loan to project costs. This means the projected gross development values will influence it. However as a general guide the majority of lenders will offer 70% to 75% of the building costs and purchase price. If you need 100% finance for the project, it is possible to get. However the criteria that must be met will be more extensive. You could offer to put up additional property as equity against the loan and it helps if you have a proven track record in property development. If you are looking for 100% then a broker will stand a much better chance of finding it than you can.

Property development loans can as a rule of thumb be taken out between 1 and 20 or more years. Of course this will depend usually on the size of the project you are undertaking and the amount you need to borrow. If the project is costing hundreds of thousands of pounds then you would have to take it out over a longer period. Larger loans are usually offered on an interest only basis and this means you only repay the interest part.
However upon completion of the loan you would then have to find the money to pay off the capital borrowed in full. Lenders will need to see you have the means to do this before they will give you finance this way.
About the Author
Sean Horton is a Director of Enhanced Wealth, a whole of market mortgage broker and IFA specialising in mortgage advice and the associated areas of income protection, mortgage protection, mortgage life cover and Property development loans .
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