Whether your development project is a new build, conversion, or heavy refurbishment, it is usual to following the following process before the completion of the loan:
1. We gather high level information about the borrower, the development project, funding requirement and security.
2. Conduct a search of the market for the development finance lender offering the best terms.
3. Gather information the lenders require for credit approval
4. Agreement in principle then offer letter subject to a valuation and security are issued to the borrower
5. Upon acceptance of the offer, a site visit, project monitoring report, valuation is instructed to confirm the viability of the project and the current and end value of the asset securing the loan. The valuation and project monitor fee must be paid in advance.
6. The lender and borrower appoint a solicitor to act on their behalf. The borrower is responsible for both the lender legal fees as well as their own.
7. A formal loan offer is issued upon satisfactory valuation and other conditions.
8. Completion of security.
9. Loan drawdown.
10. Periodic release of funds to cover the build costs
11. Repayment of the loan upon sale of property, refinance onto a long-term mortgage or combination of both.
Information needed for a property development loan application
The role of a property development finance broker is to provide the lender with a professionally presented, clear and accurate proposal to ensure a fast credit approval. With a well packaged funding proposal, we can access more lenders to get the best development loan terms and reduce your overall cost of borrowing.
The property and development
- Details about the property, existing use, location, and purchase price
- The planning permission in place or otherwise and the proposed development
- Gross development value upon completion. This should be based on valuations or comparable evidence of similar properties sold nearby and/or opinions from trusted estate agents
- The exit/repayment strategy which is usually from the sale of property, refinance onto a long-term mortgage or combination of both.
- A Development appraisal providing information about the development, location, duration of the project, residual site value, estimated build costs, gross development values and risk assessment.
- Project drawings and designs.
- A schedule of works lists the building works required on a new build or refurbishment project and is usually produced by the architect, designer or construction professional and can be used as a supporting document for building contractors accurately quote for the work.
- Breakdown of build costs and cash flow with particular focus on when funds are to be drawn.
- If a corporate entity, for example, a Limited Company or SPV, a group chart structure is needed providing information about the directors and shareholders.
- Information about the applicants or directors experience. This is usually in the form of a CV detailing their background, history of previous development experience and demonstrable track record of delivering successful development projects of a similar size and nature.
- Assets, liability, and income statement to show income and net worth. Some lenders request a personal guarantee to support the borrowing and as such, it is important that the borrower has the means to support the guarantee and capital to support themselves and potentially cost overruns.
- Information about the experience and past projects of the lead architect, project manager and build contractor.