What are the Loan Options for a Property Developer?

Published: 2nd July 2019 16:47

If you have high hopes of becoming a property developer, then you’ll need to come up with a finance plan to help get your foot into the market. Without the adequate finance to support your goals, you won’t be able to expand on your professional portfolio. Luckily, you don’t have to worry about saving up all of the cash off your own back as there are plenty of options available to research.

If you are looking to secure the most suitable finance option for you to make your property development career a success, these four types of finance are a good starting point to think about:

1. Development finance

Whether you’re purchasing a residential or commercial property, you could think about taking out a development loan lender option. Available for periods between 3-24 months, it allows potential property developers to purchase the site, any construction that is set to take place and equity release. This type of loan is only available to the experienced developer, so do bear this in mind, but it’s always an option to consider once you have built up a successful portfolio.

2. High-street mortgages

This type of mortgage is what you would typically use to purchase a residential property, and these can be applied for at most banks. If you’re planning on living in the property that you’re carrying out the renovations on, then this would be the best option, but do be aware of the added costs you may not have initially been well-informed about. The application process can be gruelling though, and you will need to prove that you can pay back the loan over a set amount of time. There are different types of mortgage options to think about. For some, you will only have to pay back the rising interest, while others will be fixed rate so the amount of interest will stay the same over an agreed period.

3. Commercial mortgage

Similar to the high-street mortgage, the commercial loan means you’ll still be given a loan from the bank but is solely intended for developers looking to purchase commercial properties. Instead of your income being taken into account, your business success and assets will be the focus to determine whether you’ll be accepted. Upon first starting out, it can be hard to secure this type of loan, as you don’t have the evidence to prove your success in the development industry. This is when it may be best to write out a business plan that states how you wish your commercial property development business to play out. It will be reviewed by the lender, and if your plan sounds convincing and has the right evidence to back your claims, you’re more likely to be accepted for a commercial mortgage.

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