New Building Projects/Construction Finance

What is construction finance?

Financing a New Build | Financing Options |

Construction finance, also commonly called development finance, is a short-term loan used to fund building projects.

Development or construction finance is similar to a bridging loan in that they are given on an interest-only basis, usually have a 12-month repayment period and up to 75% LTV.

Call us today to discuss your eligibility for a loan: 01825 749 721.

Bridging or building loans: What’s the difference?

What differentiates bridging loans and building loans is the capital.

With a building loan, the capital that covers the construction work is given in staged drawdowns.

A staged draw-down for development finance loans means that you only pay interest on the amount of money you have loaned.

Each stage of the build will be assessed by a quantity surveyor before the next instalment is given to you, so interest of a construction loan is payable only on the funds that have been drawn down.

Here at Hunter Finance, we understand that the property investment market is not always as straightforward as it could be.

With over a decade specialising in development finance, you can trust us to help you get your property project off the ground.

Call us today on 01825 749 721.

Financing a new build

Self-funding a construction project can be a daunting prospect, but there are a number of options available to you.

A building loan would allow you to buy the land, as well as fund the construction.

Development finance options for residential properties are more complicated because these tend to be offered on an unregulated basis, and are often capped at 12 months.

Self-build mortgages are a more suitable financial solution for personal properties.

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Self-build mortgages

Self-build mortgages are similar to construction loans in that they are paid in instalments.

Constructing a property on an individual residential basis is considered a risk, therefore these loans come with significantly higher rates than standard residential mortgages.

Self-build loans also require larger deposit down payments of around 25%.

This percentage can be as high as 50% if you have a bad credit score or if you have little to no experience.

Commercial construction loans

Commercial premises include retail, leisure, industrial, care homes, professional properties such as schools and surgeries, agricultural and semi-commercial properties.

The lender will consider finance applications by considering credit rating, deposit, security, exit strategy and the viability of the investment.

Hotel construction finance is calculated and assessed in the same way. Most financial directors will prefer to see that you have the necessary licenses to operate in the hospitality sector.

Applying for hotel construction loans will include detailed checks and extra deposits or security.

What other construction finance options are there?

1. Equity finance

Equity finance means that a business offers a share of its ownership to an investor in exchange for capital.

This is a particularly attractive option for business owners, as it is a way of gaining funds for a construction project.

It is vital to seek specialist advice when considering equity finance options.

2. Bridging loans

A bridging loan is a short-term finance solution that will allow you to purchase a plot while you await the sale of another property or piece of land.

3. Self-finance

As the name suggests, self-financing a development project means funding it yourself, using only your own income, rather than outsourcing from lenders and investors.

In some commercial cases, a business may find themselves in a financially stable enough position to fund a construction themselves.

4. Equity in other assets

If you or your company have mortgages on other assets, then an alternative finance solution would be to refinance these, and release the equity so that you can use it on a property development scheme.

5. Debt finance for construction

Debt finance options can provide supplemental funds that will allow you to pursue your new build.

Whichever option you are considering, it is vital to consult a finance specialist who will be able to help.

Whatever your property development needs, we can help you find the financial solutions best suited to you and your project.

Call us today to discuss your loan eligibility and how much you can borrow: 01825 749 721.

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