Compare Development Finance Rates

How to use Brickflow's development finance comparison tool?

Property development starts with due diligence: of the site, the market, build costs materials, contractors… the list goes on. But far too few developers and investors check their finance as part of that initial stage. 

Knowing your finance options before committing to any development site can be the difference between success and failure.

As the UK’s first development finance sourcing tool, comparing live development finance loans couldn’t be simpler:

1. ENTER your project criteria and model your deals

• It takes seconds to enter your project details and search loans from banks, non-banks and specialist development finance lenders
• Instantly see how much you can borrow and how much it will cost

2. COMPARE loans from 100+ specialist lenders

• Compare max LTVs, rates, fees deposit requirements, ROCE (Return on Capital Employed), profit and more
• Filter and sort your results
• Save your search and log back in later

3. APPLY directly from the platform with your intermediary or a Brickflow partner

• Secure a same-day Decision in Principle (our record is 7 minutes!)
• Apply using our digital Smart Appraisal™, the only tool on the market that connects directly with lenders
• Lenders love Brickflow’s digital application because it covers everything they need to know - but if one lender says no, apply to another with just one click, meaning no more repetitive form-filling

Your intermediary will manage your application and ensure you’re happy with the loan terms.

Why is it important to compare development finance

Most property developers and investors don’t think about their finances until after they’ve had an offer accepted on a site. 

We’ve seen many many occasions where a developer has underestimated their finance costs, therefore over estimated their profit outcome and consequently overpaid for a site. That kind of error can set your career plan back years. 

Until you carry out proper development finance comparison and understand actual borrowing costs, you can’t accurately calculate profit, and therefore how do you know what the residual land value is worth? 

Development finance shouldn’t be an afterthought. Before offering on any site, concentrate on determining the residual land value (GDV minus build costs, funding costs, professional fees and developer profit).

Here’s a worked example of calculating Residual Land Value:

• £1.4million (GDV) - £700,000 Costs (land, build, finance, professional fees) - £280,000 Profit (c.20% of the GDV) = £420,000 Residual Land Value

You can easily avoid this common pitfall of overpaying for sites or committing to unviable projects by searching development finance deals on Brickflow - it takes seconds and could save your career.

What is development finance, and how does it work?

Property development finance is a short-term loan used to fund ground-up construction, conversion or refurbishment of buildings. It is normally arranged through high street banks, non-banks or specialist lenders, and can cover part of the initial land/site purchase and up to 100% of the build costs. The borrower repays the loan by selling or refinancing the completed project.

The loans are tailored specifically to each project and paid out in stages to match the build schedule. The two distinct phases are:

• Phase 1, Acquisition of land or site: A portion of the development finance loan that is provided to secure the land.
• Phase 2, Funding the construction process: Payments are made in tranches (loan segments, paid in stages) at key points throughout the construction process. The specifics of the tranches (how much and how often) are agreed early in the process with the lender’s Independent Monitoring Surveyor (IMS) to align with construction, although the amounts and timings will almost certainly change as the project is delivered.

Residential development finance is used to fund development work on residential buildings for sale or rent. Commercial development finance is funding for developing commercial property, either for rent, sale or use as your own business premises.

Securing development finance might seem daunting at first, but we’ve broken the process down into 20 simple steps so you can see exactly how the development finance process works.

What can development finance be used for

Development finance can be used for a range of projects and building types, across all sectors of the property market, including:

• Residential: Building housing and flats, whether individual homes or multi-unit sites/ apartment blocks
• Commercial: Retail centres, office spaces, storage facilities, care and retirement homes, hotels, leisure, student accommodation, medical centres, licenced HMOs, multi-unit freehold block (MUFB), education
• Mixed-use: Developments with residential and commercial units in the same building or site
• Permitted development: Certain work that can be carried out without planning permission, for example, certain conversions of commercial buildings to residential use
• Industrial: Infrastructure, power stations, research and development properties, heavy manufacturing (there is some crossover with commercial spaces like wholesale warehouses and distribution centres)

Your project will determine what type of development finance you need, but ask your intermediary if you are unsure. 

To find out how much you could borrow for a development project, run your numbers through our real-time development finance calculator.

What to consider when comparing development finance deals

Many property developers fall into the same traps or bad habits when it comes to securing their development finance loan, and one of those is chasing the lowest rates above all else. 

We discuss more of these bad finance habits in our article ‘The Development Finance Paradox.’

One of the biggest false economies in development finance is believing that the lowest development finance rates equal the best development finance deals. Many other key metrics can affect your return more than rates.

Some things to consider when you compare development finance include:

• Loan to Cost (LTC): A lender’s maximum LTC directly affects your capital input requirements. Often big-name banks will lure in borrowers with low rates but then only offer a 60% LTC, meaning the remaining 40% has to be funded by your own capital or capital plus investor input, who will take a chunk of your profit.
• Deposit requirements: As above, your deposit requirements are determined by your LTC. When you compare development finance, consider how much deposit you want to contribute and whether or not it could be better invested in an additional project simultaneously rather than tied up in one - especially so in slower markets when securing a sale can take longer.
• Day 1 land cap: Lenders will have different % loan caps against the day 1 land value. How much you borrow against the land (the land loan) is calculated by subtracting the interest costs, arrangement fees and projected professional fees, then 100% of the build costs plus build contingency, as long as the Day 1 land cap is adhered to.
• ROCE (Return on Capital Employed): Most experienced and savvy property developers focus on ROCE rather than profit.
• T&C’s: Are you happy with the loan terms, for example, is it long enough to complete your project in that timeframe?
• Fees and charges: Lender arrangement fees are mostly set at 2%, though there will be variation. Exit fees are also common-place; up to 2% is possible here as well (make sure the lender is charging any exit fee as % of the loan, rather than GDV). Compare the whole development finance deal though rather than focusing only on one aspect.

Choosing the best development finance deal for your needs?

To find the best development finance deals for your property project, you need to shop around and compare development finance from the breadth of the market.

Brickflow’s real-time development finance comparison tool factors in over 50 lenders including banks, non-banks and specialist lenders across the UK. It is the fastest and most comprehensive way to see what you can borrow and how much it will cost you. 

How Brickflow can help you choose the best deal:

• Your search result page will enable you to compare property development finance rates, LTV’s, build loans, land loans, arrangement fees and more.
• Sort your results according to what is the best deal for your needs - Return on Capital (ROCE), profit, biggest loan or cheapest rates.
• You can request DIPs (Decision in Principle) from up to 5 lenders simultaneously, and receive offers within minutes, locking in your deal the same day.
• Our criteria filters, further help you choose the lenders that meet your specific requirements.; filter on experience, property type, rate type, etc.

Read more about development finance and how it works.

Pros and cons of development finance

Without development finance, much of our built environment wouldn’t exist. Before you compare development finance for your next project, consider the pros and cons.

The Pros of Development Finance

• Can fund an array of projects and provides an opportunity to take on large-scale development.
• First-time developers who present a viable project with detailed due diligence can be eligible for finance.
• Tailored to your project, with segmented release of funds to ensure adequate cash flow throughout construction.
• Lenders can be flexible when you form a close working relationship that maintains honest communication throughout.

The Cons of Development Finance

• Securing development finance can be a long process. It requires a comprehensive application that covers your project in minute detail and demonstrates your and your professional team’s ability to deliver.
• Loan approval then comes down to third parties, such as valuers and surveyors.
• Interest rates and fees are higher than other property loans due to the level of risk involved for lenders.
• Projects often overrun, both timewise and budget and extending your development finance loan can be costly, with penalty fees as well as exposure to interest rate fluctuations.

Development finance funding alternatives?

Development finance is specifically tailored to fund ground-up construction, converting the primary use of a building or large scale refurbishment work, in both residential and commercial properties. 

In most cases it is also only intended for property investment as a business venture, i.e. to generate a profit from sale or rental. The exception is commercial development finance, where the borrower can fund the development of a building that will be used as their own premises.

Depending on your project, there are alternative types of finance that might be more suited to your needs, such as:

• Self-build mortgage: For homeowners who want to fund their own house build.
• Bridging finance: For less involved projects, that can be completed in a shorter timescale. Some types of bridging finance include:
  • Refurbishment bridging finance: Suited for cosmetic development and renovations, conversions such as turning a property into an HMO, extensions and altering internal layouts, etc .
  • Auction finance: Can facilitate buying a development site at auction to meet the short 28-day timeframe for completing the purchase, before moving onto development finance.
  • Commercial bridging loan: When a quick transaction on a commercial property is required.
• Commercial mortgage: For commercial property, it is possible to refinance on a commercial mortgage to release equity to fund development work.

Use Brickflow's development finance comparison tool to make sure your deal stacks

Before every property project you need to check whether your deal stacks against actual borrowing options. 

Brickflow’s development finance comparison tool is the quickest, most efficient way to model your deal, see what you can borrow, how much it will cost and find the best development finance rates on the market. 

It takes a few seconds to enter your project details and instantly access live loans for your project, with details on: 

• LTCs and LTGDV (Loan to Gross Development Value)
• Interest rates
• Arrangement fees
• Deposit requirements
• ROCE (Return on Capital Employed) and profit, you will find the right deal in seconds
• True Monthly Cost ((Interest Rate / 12) + (arrangement fee + exit fee) / number of months.

Not only can finding the right loan save you tens or hundreds of thousands of pounds, more importantly, knowing actual borrowing costs from the start will stop you from overpaying for sites. 

In a single digital journey, you can apply (with your intermediary) to multiple lenders, and with up to 30 criteria filters, you won’t waste time applying to lenders that can’t match your requirements.

Compare development finance using Brickflow – you’ll have a decision in minutes, not days!