You may be in the process of searching for potential funding options for your property development project but be a little unsure on the type of loan to take advantage of. Obviously, the type of loan you end up taking out will be completely dependent upon your situation and taking the time to weigh up the pros and cons of each type of financing is a key step you need to consider.
One funding option many construction companies and property developers are turning to is the property development loan, but why is this type of funding gaining popularity?
In this article, we will take a look at how you can successfully take out a property development loan, the advantages of doing so and how you can find the perfect lender depending on your business’ specific requirements.
How Do Property Development Loans Work?
Property development finance is specifically designed for any property developers or construction firms who are looking to access capital deposits at each stage of the property build, until it is completed. This type of loan works in a slightly different way than a commercial mortgage, as rather than taking a lump sum out from the offset, a development finance lender will work with you to split the budget up based on the key milestones of your property development project.
Following approval of your loan, the lender will provide you with a property surveyor, who will assess the property you are developing at each part of the building process, signing off the next release of capital as the key stages of the project are completed.
Most lenders will allow you to borrow up to 70% of the gross development value, and since development finance is initially issued based on an incomplete build, this does affect the terms you are able to take advantage of. Due to the risk being significantly higher than a complete build for lenders, you can usually only find short to mid-term loans.
Advantages of Property Development Loans
Property development loans offer several key advantages over other types of property loans that are available on the market today and are ideal for those looking to work within a strict set of budgets at each stage of their property development project.
Some of the benefits you can expect to find with property development finance are:
- The main strength of this type of loan lies in the fact that it is ideal for keeping a project within strict budget parameters. With funds only being released when each part of the build is completed, you can rest assured that you are not overspending at any stage of your project. This is perfect for those who are looking to maximise their profit margins.
- Throughout the build, you will be guaranteed enough capital to keep the project moving forward, rather than having to apply for an additional loan mid-construction.
- With property development finance generally dealing with much larger levels of lending, if you take the time to find a loan with a fantastic repayment rate, you can stand to save significant sums of money over the course of your build.
It’s also worth considering taking the time to research into other potential funding options for your next project though, in some cases you may be best off utilising a commercial mortgage broker or even bridging finance depending on your specific requirements.
How To Find The Right Lender For Your Needs
Now that you have all the information you need about property development finance and the benefits it can bring to your next project, you may be thinking it is time to start comparing lenders. This can be a pretty time consuming process if you manually go through several providers for quotes yourself, especially when you’re keen on ensuring you get the best deal for you or your business.
The process of applying for these loans can take weeks, and in some cases months to complete, so it’s worth considering outsourcing this work to a company with vast experience in dealing with a wide range of lenders. Hiring a company like Ping Finance to carry out this process can save you a huge amount of time and hassle, as we take the time to carefully consider the most suitable lenders on our panel for your specific requirements. Following this, we will approach several lending parties, presenting all of the options to you.
Choosing to search for a property development loan in this way is definitely preferred by the vast majority of those who are looking to take a loan out. There are several benefits you can expect to see if you work alongside Ping Finance in your search for the perfect lender, as a dedicated member of our team will be providing you with several funding options throughout the process; allowing you to concentrate your efforts on other aspects of the project.