What are the costs of Development Finance?

There are a number of charges and fees you need to pay when taking out a development loan. The overall borrowing cost can vary widely depending on which development finance lender we approach on your behalf. Much will depend on your debt requirement; track record and asset being financed. But in the main, you should expect to pay the following costs:

Facility fee or arrangement fee – This is calculated as a percentage of the gross or net loan. It can sometimes be added to the loan, but this will increase amount of interest you pay and overall amount you owe.

Interest rate – The interest rate on a property development loan is charged on a monthly or annual basis.

Exit fee – This fee is charged by the end when you repay the development loan. Applied as a percentage of the gross or net loan amount or gross development value.

Broker fee – A fee charged by the broker for processing the information required to arrange a loan. The amount can be a fixed percentage of the development loan or a fixed fee.

Other possible development finance fees

Valuation or survey fees – The purpose of the valuation is to provide the lender an assessment of the current market value of the site, anticipated value at completion and viability of the project.

Revaluation fees – Further advances may be requested if the borrower feels that the property has increased in value. A revaluation will be commissioned to support this.

Application fees – An up-front fee, usually non-refundable, charged by the lender and broker for submitting an application.

Legal fees – The borrower is responsible for their own and the banks legal fees to prepare and complete the loan and security documents.

Monitoring surveyor fees – Development finance lenders instruct a monitoring surveyor to ensure a property development is on track executed in line with planning consent, regulations, construction schedule, standards, design, and budget. As such, the role of the project monitoring surveyor is to advise on the progress of the project and certify the release of funds, as agreed with the developer. The role starts prior to construction to assess the viability of the project and continues right through the build until completion. Fees are charged to the borrower for the initial assessment and each drawdown.

Drawdown fees – A drawdown is charged each time the monitoring surveyor carries out a site. The cost will depend on the lender, nature, and size of the development project. During these inspections, a report is provided to the lender to confirm the build is on track and approve or certify the releases of funds to cover the build costs.

Telegraphic Transfer fee (TT Fee) – This is an electronic transfer of funds from the lender to a receiving bank account.

Quest commercial finance provide development funding on a commercial basis. This means we are able to source development finance for properties intended for rental or sold on completion and not for owner or their family to live in when construction work is completed.

Contact us to discuss your borrowing requirements

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