Development Finance Guide | Development finance helps you fund land purchases, construction costs and major property projects. This guide explains how development finance works in the UK. It shows when to use it, how lenders assess projects, how much you can borrow and how to secure the best terms. It also includes internal links to support your property finance journey.

What Is Development Finance?

Development finance is a short-term loan used to fund land, construction or conversion projects.  It covers purchase costs, build costs, professional fees and contingency reserves. The loan is repaid through the sale or refinance of the finished property.  Lenders release funds in stages during the build. Each release depends on site inspections and project progress.

You can learn more about different brokers in our guide: How to Find a Mortgage Broker.

When You Need Development Finance

You should use property development finance when:

• Buying land for new builds.

• Converting commercial buildings to residential use.

• Completing heavy or structural refurbishments.

• Funding multi-unit projects.

• Developing mixed-use buildings.

• Completing phased developments.

This type of finance suits property developers, investors and builders who need staged drawdowns.

Key Metrics Lenders Assess

Lenders use several core metrics when they assess your application:

1. Gross Development Value (GDV)

GDV is the value of the finished project.
Lenders often offer up to 70% of GDV for strong residential schemes.

2. Loan to Cost (LTC)

LTC compares the loan amount with the total project cost.
Many lenders offer up to 85% LTC for experienced developers.

3. Loan to Value (LTV)

LTV applies when land or property is already owned.
Typical LTV limits range from 50% to 70%.

4. Developer Experience

Lenders favour proven developers with similar project experience.

5. Equity Contribution

Most lenders require you to contribute 10% to 20% of total project cost.

If you need commercial expertise, you may also benefit from our Commercial Mortgage Guide

Types of Development Finance

Land Acquisition Finance

These funds are used to purchase land before construction begins.

New Build Finance

This supports residential or mixed-use developments from the ground up.

Conversion Finance

Used for office-to-residential conversions or similar projects.

Heavy Refurbishment Finance

Funds structural works that change layout, use or building integrity.

Mezzanine Finance

Top-up funding that reduces your required equity.
Mezzanine rates are higher due to increased lender risk.

Typical Costs and Fees

Development finance costs vary depending on project size, location, and risk.
Typical charges include:

• Interest rates from 6% to 16% per year.

• Arrangement fees are usually 1% to 2% of the loan.

• Exit fees are sometimes 1% of the loan or GDV.

• Valuation fees based on project size.

• Monitoring surveyor fees during the build.

• Legal fees for both parties.

Interest is usually rolled up, so monthly payments are not required.

How the Development Finance Process Works

The development finance process follows a clear path. Lenders assess your project, your team and your financial position. They then release funds as construction progresses. The table below summarises each stage.

Development Finance Process

Exit Strategies for Developers

You must show a clear repayment route.

Common strategies include:

Sale of Completed Units

Units sell on the open market to repay the loan.

Refinance to a Long-Term Mortgage

Refinance through a buy-to-let or commercial mortgage.

Partial Sale and Retention

Developers sell some units and keep others for rental income.

How Much You Can Borrow

Your borrowing amount depends on:

• GDV strength and location.

• Total cost plan.

• Equity input.

• Your experience and credit score.

• Project type and exit route.

Most lenders fund between £ 50k and £ 100m, depending on project complexity.

Documents You Need for Development Finance

Lenders usually ask for:

• Asset and liability statement.

• Planning permission or planning reference.

• Full schedule of works.

• Contractor overview.

• Cost plan and timeline.

• Exit strategy explanation.

• CV of previous development projects.

Tips to Secure Better Terms

• Prepare a full development appraisal.

• Hire a reputable builder with strong references.

• Provide a realistic project timeline.

• Keep a minimum 10% contingency.

• Work with a specialist development finance broker.

You can speak to one of our specialist advisers for personalised support.

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FAQ | Development Finance  Guide