How to get the best deal on development finance

Get the best dealGet the best deal

If you want to undergo property development, you may need to borrow money to fulfil your ambitions.

It is important that you get the best deal possible to ensure you receive the money you need, and that you are paying that money back at a reasonable interest rate.

There are several things you can do to reduce costs when borrowing money:

Get all your funding from one place

You can get funding for your property development from a number of different sources who can piece together funds for each specific part of your development.

However, there are many places which offer full funding for your development which would likely be more financially beneficial to you in the long run.

For every lender you work with, there will be costs associated with each of them that you will have to pay.

These range from legal costs to exit fee costs on top of paying back interest on the funding they have secured for you.

Each lender will have to be negotiated with and will negotiate with each other, costing you time and money meaning your project will be stalled as you wait for agreements to be reached.

All lenders involved have to be on-board with each other and if any lenders drop out at any stage in the process, you will have to find a new lender and start again.

How to get the best deal on development finance

Working with a single lender should make the process much quicker as it is between you and them to work out the details early on so that once funding has been secured, the process should become much quicker than if you rely on multiple lenders.

A single lender contributing fully to your project will be heavily invested in its success as lending is a risk to them, much more than if they only lent a small portion of the funding as part of a group of lenders.

This risk to single lenders means there is more reason for them to want you to succeed and will likely be more forthcoming with help and advice to ensure the project is completed successfully.

Build relationships with a lender

With all that in mind, if you build up a relationship with a single lender, they are more likely to offer you more favourable rates. Growing your own industry experience and having a history of property development will make you a trustworthy developer for lenders. Contact Hunter and find out how we can help today.

If your first project with a lender is successful, they will be likely to lend to you again for future projects.

If you decide to use a different lender, you can show previous successes in your development projects to convince them to lend to you at a rate of interest that suits both of you.

Have a strong, clearly defined exit strategy

For the most part, your exit strategy refers to the endgame of your project. If you have a plan for your development once it is completed, you should outline that to the lender. If the lender can see what the intention is once the project is completed, they may be more compelled to lend money to you at a favourable rate.

Read more about exit strategies here.

Borrow more, borrow less

Often, the larger the loan you take out, the better the interest rates for you. Of course, you should be going into your project with an idea of what you need so you shouldn’t ask for more money than required, but a larger loan could cover some unexpected costs that arise in the process as well. Learn more about how much you can borrow here.

Putting down a larger deposit can also have a positive impact on the rates you pay in the long term.

Larger deposits may also be necessary if you have a poor credit history or a low level of industry experience, in order to persuade the lender to look past this and give you better rates.

Using a broker can cost you unnecessary fees and delaysUsing a broker can cost you unnecessary fees and delays

It is common to use a specialist broker to secure the best deal for you. However, this is not necessary and will provide an additional cost. The cost of the broker service will have to be included and weighed up against the overall benefit you receive from a lower rate of interest.

Hunter Finance can use their expertise in the property field and ensure you don’t waste time on lenders who are unlikely to back you. We may be able to offer you a good deal on your finance and you will avoid brokers’ fees as we lend our own money.

Property page updated on 29th April 2021 by James Bougon