Property development finance

Property development finance

Many people are involved in the world of property development. This could mean purchasing a rundown buy-to-let property with the intention of renovating it and putting it on the rental market. At the opposite end of the scale, it could refer to buying a plot of land and developing a much larger residential or commercial venture.

No matter the situation, chances are you’re going to need finance to make your property development project a reality. The sums vary, but in many cases, property development loans supply an answer.

Clever Lending can help you discover more about property development finance today. Give our experts a call or use our online contact form to start the process. No hassle, no hard sell – just clear and honest information you can act on.

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How do property developers raise finance?

Property developers can apply for a variety of financial loans and products to help them get underway on their project. The type of loan most suited to each project may depend on the size of the project and the amount of money required.

We’ll look at development loans and bridging loans below. There are key differences between them, and you’ll see how and why bridging loans can be ideal for many property developers.

What is a property development loan?

A property development loan is usually applicable for larger building projects. These could include a block of flats, a commercial project, or even a building project that combines the two. It can help fund the cost of buying the land along with the actual building process. It could also cover buying land where a property or properties already stand but need extensive renovation and refurbishment to become usable again.

A development loan is typically issued in stages. If agreed, the first part of the loan is paid for the borrower to buy the land and/or property required. As various stages of building or renovations take place, the lender will assess the value of the property and issue the next portion of the loan. This continues until the entire loaned amount is paid out and the building or renovation process is complete.

Property development loans sometimes come from regular lenders, but they’re also available from private lenders.

What is a bridging loan?

Bridging loans get their name from the role they play in helping to fund property or land purchase. In the case of property developers, bridging loans could help them bridge the gap between buying land or a property to develop and completing the project. They’ll only begin to reap the rewards of the project upon completion, so the bridging loan helps them fund the necessary steps to get there.

In short, getting from A to B can be tricky if you don’t have the funding to make it happen. A bridging loan happens over the short term rather than running for as long as a mortgage. They usually work on an interest-only basis, so you’d receive the money you need to make your purchase or do up a property, with only interest to pay on the loan for the time you hold it.

A bridging loan can open many opportunities to someone in property development – opportunities they’d otherwise miss out on. To be considered for a bridging loan, you need to be able to prove you can repay the loan (plus interest). This is something many property developers do simply by renovating and then selling the property for a profit.

Bridge Loan Calculator


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Borrowing amounts, fees, interest and total to repay is intended to be a guide based on the amount entered. A bridge finance specialist will fully assess your requirements and provide an illustration.

Bridging loan amount £200,000 (including £4,035 lender and £1,190 broker fees), 0 monthly payments with a monthly interest rate of 0.68% rolled up over 12 months giving a total amount payable of £224,251 at an APRC of 10.2%. The contract will be secured against the property.

Can I use a bridging loan for property development?

Yes, and indeed this is a key reason why people look at these loans when considering purchasing property for renovation or land for building purposes. If you already have experience in property development, you’ll also stand a chance of being able to access better terms for the loan. That said, the property value will also come into play, along with your credit history. The better all these factors are, the more promising this option could be.

Bridging loan vs property development loan

You may still wonder what the difference is between the two. The key difference is that a bridging loan is granted in a lump sum. Conversely, a property development loan, if agreed upon, is released in separate sums at different points of the development process.

Furthermore, bridging loans are typically much faster to arrange if you take this route and are accepted by a lender. It can sometimes take months to arrange a traditional property development loan, whereas a bridging loan may take as little as seven to 28 days – sometimes even less. If you’re looking to purchase land or property quickly to beat the competition, this could potentially be a far better choice, depending on the size of the project.

In both cases, you must agree to the repayment plan proposed by the lender. With a bridging loan, you could pay monthly interest or pay back the entire loaned sum at the end of the term with the accumulated interest. Development finance can also be repaid in one hit, usually after anything from six to 24 months. Refinancing is another possibility, especially if the property developer doesn’t want to sell the property but instead wishes to rent it for long-term income.

What is the typical LTV for a bridging loan?

Most lenders offering bridging loans go up to around 75% loan-to-value. However, some may consider anything up to 100% LTV on a bridging loan. Their requirements for such loans are likely to be more stringent, and the applicant may need to prove they can provide security to back the loan. This provides assurance to the lender that they’d get their money back if anything went wrong.

Call today for no-obligation advice and support

If you are looking for property development finance and you want to know more about bridging loans, our experts can help. With extensive experience in finding the right bridging loan for all manner of property development clients, you know you’re in safe hands. Chat with the experts today on 0800 316 2224.

Speak to us today on 0800 316 2224 or speak to us on live chat