Development Finance Lender Update

Arguably the most serious problem in the market at present is the depressed level of mortgage lending. There are few signs of this improving and, if anything, the shortage could get worse as the FSA considers imposing tighter rules on the lenders that could spell the end of interest only mortgages.

Notwithstanding this, we continue to seek out the best deals for our clients and to locate new funding sources. In this Blog we look at:

- Two new development lenders

- Development Finance in Scotland and the North of England

Bank Finance for Developers

This bank is keen to lend on viable schemes. An exciting feature is that they will allow the developer to "drip" in their contribution to the construction costs provided the bank is happy that future cash flows are likely to be generate sufficient income to fund the developer's share of the construction costs. This means they can in some circumstances lend up to 60% of land value. Their terms are:

• They lend to UK based co's, individuals and partnerships.

• Houses, flats, mixed use - England only.

• Minimum loan £500,000. Maximum loan £3,000,000.

• Interest rate - 8% p.a minimum - can be rolled up or serviced.

• Arrangement fee 1%,

• Exit fee 2% of loan.

• Loan To Cost- 60% of land; 60% of build.

New Small Development Lender

To add to our growing list of lenders we have sourced one that works on competitive terms based on a maximum loan of 55% to Gross Development Value. Terms are normally:

1% arrangement fee

Interest is currently around 7% to 7.50%

There is an exit fee of 1% to 1.50% of GDV

London and Home Counties only.

Development Finance in Scotland and the north of England

We are very aware that locating funding for development is probably harder here than in the south of England. However, amongst our lenders we have one that is happy to look at schemes for houses and flats in Scotland. They will lend up to £500,000 per development to a maximum of 60% of GDV.

Another lender will finance housing schemes for experienced developers in areas in the north of England where there is a strong demand to the value of £1,250,000 up to a maximum LTV of 70% (this LTV includes rolled up interest).

If you would like more information please call or email us chris@cdpropertyfinance.com

Development Finance Case Study 2010

West Sussex - £500,000 residential development finance for 4 new build houses through high street bank. Client had owned the land for some years. CD Property Finance arranged 100% finance to build the houses which should sell for £250,000 each.

Surrey - £150,000 loan to finance conversion and new build of 2 flats. Client had good construction experience but no development experience. The lender completed the loan quickly as work had started on site. The flats will sell for a total of £440,000. The lender required insurance for this project and CD Property Finance was able to introduce its insurance broker to the client, resulting in the insurances being in place in time for drawdown.

If you would like any more details or advice regarding property development finance, please contact us on chris@cdpropertyfinance.com
www.cdpropertyfinance.com.