What Types of Finance Solutions are Available for your Property Development Project?

Posted by The Landsite on 30th November 2022 -

The latest in our Spotlight On series features Sancus Lending Group 

Property development finance is short to medium term borrowing that is used to fund a range of projects, including new builds (ground-up), major or minor refurbishment, office to residential conversions and multi-unit projects. 

The loan lasts for the duration of the building project and is usually drawn down in stages as the development progresses. The loan is repaid on completion through sale of the property/properties or on refinancing with a traditional mortgage provider. 

Developers usually turn to specialist lenders, such as Sancus Lending Group, as their terms are more appealing; the percentage of deposit required is generally lower, they can act with more speed, and they offer greater flexibility if problems are encountered throughout the development. 

Loan criteria usually depends on the project and lender, and the amount lent is based on a loan to Gross Development Value (GDV) ratio. In simple terms, the GDV ratio is the size of the loan as a percentage of the estimated projected value of the development once completed. The higher the percentage, the more risk and alternative finance providers are more likely to operate in this space as they are not restricted by high street lender’s more risk averse credit policy. 

The different types of loan commonly available to developers include: 

1. Development Finance - This type of finance needs to have planning permission agreed before application or an arrangement agreed subject to planning.

2. Residential Bridging Loans. A short-term finance for securing a loan quickly. The loan is secured against a property. 

3. Buy to let loans. If investing in a rental property portfolio such as an HMO this is an option. A deposit of at least 25% of purchase price is usually required and repayment is interest only.

4. Residential land loans. Similar to development finance these loans are used to fund larger residential schemes. It is usually an interest only loan with funds released in stages as the project progresses and with regular inspections from the lender.  

5. Mezzanine finance. This is a top up loan known as equity funding. If a developer cannot pay back a loan in time, the lender takes a share of the development profits. 

Learn More About Sancus Lending Group

Sancus is an alternative short-term residential property lender specialising in bridging, development and refurbishment finance.

Teams of property finance specialists are based across the UK, Ireland, Jersey, Guernsey and Gibraltar offering fast, straightforward access to funding for developers, property investors and professional landlords.

Rates start at 0.55% per month over three core products, “Bridge by Sancus”, “Development by Sancus” and “Refurb by Sancus”.

Bridge by Sancus

Property bridging finance from £100,000 to £5,000,000 on term lengths up to 24 months.

LTV/LTC 75%/85%

Development by Sancus 

Property development finance from £500,000 to £10,000,000 on term lengths from 6 to 24 months

LTV/LTC 75%/85%

Refurb by Sancus

Refurbishment Finance from £150,000 to £5,000,000 on term lengths up to 24 months.

Refurbishment costs up to 100% and Day 1 LTV up to 75% excluding interest

LTGDV up to 75% of GDV including interest roll up

 

Sancus offer funding on a range of projects, including semi-commercial, mixed-use, HMOs, light to heavy refurbishment, ground up developments up to 50 units, major structural renovations and office to residential conversions.

Click here to learn more about Sancus Lending Group on The Landsite

 

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