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Development Finance Rates and Costs

Monthly interest rates from:

  • 0.6% per month for loans under £1 million
  • 0.5% per month for loans over £1 million

CMB work with a large number of property development finance lenders, we have collated a brief overview of the lenders below to provide a guide to development finance costs. Please note that these rates are a guide to costs, and we recommend that you contact us for a formal quotation to secure indicative terms.

The costs of development finance facilities have reduced, with a large number of lenders in the marketplace increasing.

Development finance facilities are available on a wide variety of different types of property including:

  • New build
  • Conversion
  • Large HMO or conversion to HMO
  • Commercial Development

The rates for each of the above types of property will vary depending on the lender, typically residential property attracts the best rates of finance, with commercial generally being more expensive.

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Frequently asked questions

Got a question? We have the answer.

What costs and fees do I need to consider for development finance?

Using development finance facilities will incur a number of different costs. The headline rate that most investors and developers look for is the “headline rate”, which is normally expressed as a monthly interest rate. These rates will normally be higher than a normal mortgage, therefore development finance should normally be considered as a short term funding option.

There are also a number of other costs which need to be considered, as they can be expensive. The best way to properly evaluate different bridging loans is to take account of all of the costs and fees, over the proposed term, then you will have a true cost of the bridging facility. Here we have outlined some of the costs and fees that you need to consider:

  • Interest – interest for a development facility can either be paid during the term of the loan or alternatively, and more popularly the interest can be rolled up. This means that no interest payments are required during the term of the loan and the outstanding balance for the development finance facility will be repaid on refinance or sale of the asset.
  • Facility Fee – this is the lenders arrangement fees. Development Finance Facility Fees fees vary depending on the lender and can range from 1-3%. Most lenders will allow the fee to be added on to the finance costs and therefore will be included in the loan facility.
  • Exit Fee – some development finance lenders charge an exit fee, which is calculated as a % on the value of the loan at the point of exit.
  • Legal Fees – when taking a development finance loan you will be required to cover the costs of both your legal costs and the lenders legal costs, these costs can vary, so it is important to consider these are part of your quotation comparison.
  • Administration Fees – most lenders include a small administration fee on drawdown, this can range from £0 to £750, however can be higher.
  • Valuation Fees – A lender will normally require a surveyor to visit a property which they are considering financing. This survey is paid for by the borrower and carried out on behalf of the lender. Valuation costs can vary depending on the type of property which is being financed.
  • Monitoring surveyor – development finance facilities will normally require a monitoring surveyor who will approve further drawdowns of the facility as the development progresses. The monitoring surveyor will normally get paid on a monthly retainer, with rates to be agreed between the lender and surveyor.
  • Default interest rate – Standard terms for development finance lenders are that if the borrower does not refinance or repay the bridging loan facility during the set term, then a default interest rate will apply. The default interest rate is normally higher than the normal interest rate. It is important to consider the costs of these default rates as they can be punitive to borrowers.
  • Broker fees – some brokers charge broker fees on development finance loans, these can range from £0 to a % of the loan amount.

What factors influence the rate of interest for development finance loans?

There are a number of different factors which influence the interest rates for development finance loans, we have included below some of the factors:

  • Loan to value – the higher the loan to value the higher the rate of interest.
  • Loan to gross development value (LTGDV) – the higher the LTGDV the higher the costs involved.
  • The type of property – there are three main types of property: residential – houses, flats etc, semi-commercial – e.g. flats/apartments with commercial downstairs, commercial – offices, shops etc. Residential is generally considered to be the lowest risk as there is generally a clear market for these types of assets, commercial is generally considered to be the highest risk, as there is less liquidity for commercial assets. The level of risk is taken into consideration with the rate of interest which is offered by the lender. The higher the risk, the higher the rate.
  • Location of the property – whilst this may not necessarily impact rates directly some lenders will not lend in certain areas of the country, or in Scotland for example, therefore the geographic location will have an impact.
  • Income of applicant – lenders will consider the income of the applicant for development finance loans as a matter of background, although most lenders view this as less important than a general mortgage lender, as a development finance lender is normally expecting to be repaid from a refinance or a sale of a property.


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