Development exit finance is used to repay outstanding property development finance. Once the project is nearing completion, it helps to give funds to people to use for the completion of their property and to be paid back.

They are a type of bridging loan and are usually offered with rolled up interest for the full term of the loan. These loans can usually be offered once the building is wind and watertight.

What is the meaning of development finance?

Development finance is the efforts of local communities to support, encourage and catalyze expansion through public and private investment in physical development, redevelopment and/or business and industry.

Different types of development finance

• Development finance loans
• Development exit loans
• Refurbishment finance

Why is sales period finance cheaper than development finance?

This type of funding takes advantage of the fact that the level of risk decreases significantly as the project nears completion. As such, a new lender is generally happy to pass on the savings associated with a lower risk application to you, the borrower.

When is development exit finance used?

The main reasons why this type of finance is attractive:

• Firstly, the existing development finance facility is coming to an end and sales won’t be completed in time.
• Alternatively, where development finance can be expensive, development exit finance can be used to reduce finance costs. This is becoming increasingly popular as rates drop, with our development exit finance rates starting at 0.43% per month.
• Finally, our products can be used to release capital from a development before sales come through, allowing you to move on to your next project. We can arrange funds very quickly where fast completions are required on new projects.

Costs of development exit finance

The rate that you will pay

The rate charged depends on a few factors, with loan to value (LTV) being the main driver and the strength of your chosen exit strategy also being very important.

At 50% LTV, rates of 0.45% and below are common, with rates of 0.65-0.7% being the norm at 75% LTV.

The interest charged will be quoted based on the full term of the loan, but where your facility is repaid early, you will usually have any unused interest refunded.

The various fees that will be paid

On top of the interest charged, you will also be faced with a number of fees when setting up a new loan. The main ones are the following:

Lender arrangement fee – these fees are charged by the lender for setting up the loan and are generally payable on completion. This fee is usually 1-2% of the loan amount and can be added to the loan in most cases.

Broker fees – Some lenders charge a fee for using their service (we don’t). These fees can be as much as 1.5% of the loan amount.

Lender exit fee – Although these fees are becoming less common, some lenders charge an additional fee when the loan is repaid. Where this is the case, it is usually either the cost of 1 month’s interest, or 1% of the loan amount.

Valuation fees – As the properties are new, automated valuations aren’t usually possible, meaning a chartered surveyor must visit the property and produce a report. This fee is usually charged early on in the application process.

Legal fees – You are usually responsible for both your own and the lenders legal expenses in arranging the loan. These fees are usually paid once the formal offer has been issued.

Amount to borrow

The loan size: Finance can be arranged from £25,000 with no maximum loan.

Loan to value (LTV): We can usually arrange up to 75% loan to value on residential or mixed-use schemes and can even push to 80% for certain residential developments. We can fund up to 85% LTV for some property refurbishment finance projects.

Where to get development exit finance

Lenders

The lenders who are active in the developer exit finance market are mainly bridging loan lenders. These loans are a type of bridging loan, which means that bridging lenders tend to be very well placed to offer a fast service.

Some development finance lenders also offer these loans, although this is less common.

Broker

Many lenders don’t disclose their exact rates online. So some brokers charge a fee for using their service and with loan sizes tending to be larger for property developments, these can really add up.

Comparing all options on the table and then making a judgment based on both the total cost of each proposal and the support offered by a broker is the most sensible approach.

We offer full support throughout the application process and don’t charge any broker fees for development exit finance applications.

Criteria for development exit finance

• Residential, commercial property or land acceptable
• Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
• Minimum applicant age 18 years – no maximum age
• Available in England, Scotland, Wales and Northern Ireland
• Adverse credit accepted (on a case by case basis)
• Loans from £25,000 with no maximum loan size

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